Calhoun: The NPS Institutional Archive

Theses and Dissertations Thesis Collection

1970 Zaibatsu: a study of Japanese combines yesterday and today.

Smellow, Edwin Neil

George Washington University http://hdl.handle.net/10945/15220 ZAIBATSU: A STUDY OF JAPANESE COMBINES YESTERDAY AND TODAY

by

Edwin Nei 1 Sme 1 low

n T/^/V

ZAIBAT3U: A STUDY OP JAPANESE

COMBINES Y1STJSRDAX AKD TODAY

BY

Edwin Neil Smellr

Bachelor of Arts

Antloch College, 1958

j 1 A The ! ut : to the School of Gov< ; ^nd Bus it- ess j id' Ltion of The Gee-' on

Eequixei for the Degree Cas1 Bu s ine s s LA minis tra tic

March, 1970

Thesis directed by

Id diaries Demoody, M.B.A.

' Associate Professor o; \ nisi ion

n

5^ LIBRARY

TABLE OF CONTENTS

Page

LIST OE TABLES . . . iv

LIST OE CHARTS . . . . . vi

Chap ter

I. INTRODUCTION. .

Objective Scope Organization and Mechanical Details

II- ZAIBATSU—A CONCEPTUAL FRAMEWORK......

Organization and Structure o;C Zaibatsu Companies Zalt atsu Economic Patterns

HI- ZAIBATSU EVOLUTION AND DEVELOPMENT...... yb Introduction Historical Perspective — The v/ Tpkugawa Era (1600-1868) Mitsui

i Su : go, ^ Historical Perspective — The Meiji Era (1868-1912) Historical Perspective-- The Liberal Era (1914-1931)

Historical Perspective— The 3 Ira of Kilitariam (1932-1945) IV. THE OCCUPATION EUA (1945-1952), ...... Introduction Background Occupation Economic Policies 2aiba_tgu Dissolution Personnel Purge Ma j o r Le g 3 s 1 a tio The Antimonopoly Law Deconcentration L American Policy Reorientation

Chapter Page

V. THE CHANGING FACE OP JAPAN (1932-1969) 99 Introduction Economic Perspective The Political-Economic Structure and Legislation Management Personnel General patterns of Stock Ownership The Trend Toward Increasing Oligopoly The Structure of Selected Prowar Zaitatsu Groups Intra -Group Relations and Interlocking Directorates

VI. CONCLUSION , 131 APPENDIXES

I. GLOSSARY OF JAPANESE TERMS. . , . . 136

II. THE SUBSTANTIVE PORTIONS OP THE

ANTIMONOrOLY LAW. e . . 138

LAV? TO BE USED FOR DETERMINATION OP EXCESSIVE CONCENTRATIONS 140

BIBLIOGRAPHY . . . . 141

iii

LIST OP CHARTS

Chart Page

I. The Mii;sui Interests 14

II. Mitsubishi Interests . 15 III. Sumitomo Interests ...... 16

IV. The Ya£ uda Interests 17

V. Intercorporate Relations in the Combine Sector of Japan's Aluminum Industry...... 34

VI. The House of Mitsui During the Tokuftawa Era ...... 41

VII. Market Control by the Zaibatsu in Terms of Paid-up Capital 67

VIII. Index Numbers of Industrial Production fioio^ton Countries ....s. •.«•.•.• 103

IX. Growth of Heal GHP 1958-67 . . . 103

vi

»

LIST OF TABLES

Table Page

1. Zaibatsu Combines 11

2. Zaibatsu Family Ownership Patterns (1946) .... 14

3. Summary of Interlocks Between Officers of First-Line Subsidiaries ard Officers of the Top Holding Company ir. the Mitsui, Mitsubishi and Sumitomo Combines, 1945 21

4. Loans .fede by Four Zaibatsu Barks in 1944 . . . , 23

5. The Role of the Zaibatsu in Japan's

Economy (1937-1941-1946) • 28

6. Position of the Top Firm, Top Three Firms and Top Five Firms in Selected

Markets, 1937, 1949 . . . 29

7. Market Concentration Ratios by Combine

by Subsidiary. 1943-1944. . 31

8. Japanese Industrial Dualism, 1950, 1930, 1939 50

9. Branch Operations of Selected Zaibatsu in the Greater East Asia Territories 57

10. Index cf Physical Volume of Industrial Production 59 11 National Policy Companies ...... 61

12. Japanese Military Expenditures, 1930-194.1 . , . * 64

13. HCLC Actions on Designated Companies...... 80

14. HCLC Securities Disposal 80

15- Securities Distributed by the Se-curities Coordinating and Liquidation Commission .... 82

16. Economic Purge Results under SCAPIN . 84

IV

Table Page

17. Purge Results under Law No. 2 of 1948 85

18. Deconcentration Action under Law No. 207. .... 90

19. Summary of Deconcentration Actions during the Occupation Period 96

20. Index Numbers of Industrial Production...... 98

21. Quantum Index Numbers of Japan 102

22. Wages and Expenditure of Urban Workers 107

23. Number of Cartels 109

24. Number of Cartels by Legal Basis. • . . 109

25. Number of Mergers, 1956-65. 110

26. Distribution of Shares by type of

Shareholder in Percentage Terms , 115

27. Number of Individuals Owning More than 100 shares ••••••••••••••••••• llo

28. Index of Market Share of Top Three and Top Ten Enterprises .....* 117

29. The Largest Shareholders of Hitachi, Yawata, and Fuji (1961) 119

30. Number of Firms Joining or Lea-ying Financial Groups (1967) ...... 121

31. Stock Ownership Patterns of the Mitsubishi, Mitsui and Sumitomo Groups 122

32. Comparison of All Loans Made by Main Pre-^ar Zaibatsu Banks in 1944, 1958, 1967...... 126

33. Interlocking Directorates Among the Core Companies of the Mitsubishi, Mitsui,

and Sumitomo Groupings (1959 Data) c .*..,<> 128

: "

CHAPTER I

INTRODUCTION

Since the end of the Allied occupation in April, 1952,

Japan has grom economically to take a current position as the world 'o third largest producer (the U. S«, Soviet Union and

Japan, in that order)* Its continuous real economic growth rate of 10.1 percent (since 1954) is unparalleled in history and the implications of this, and other factors, make Japan

. .l. ij. uw v vliij U- i. O . ill c* U i. vi &UlS.UUJil.JtQ IJ \jmyc t,<-L OUJ, , UUt cl ^lUtitfi'iUi political and social force in Asia now with an even more powerful potential for the future. Tha objective of this study, then, :.s to examine one of the salient economic fact which has materially contributed to Japan's becoming cuch a

dynamic and competitive nation, i.e< ? the major busint s groups.

Historically, overwhelming predominance in finance,

Industry and -rade was held by four hu^e business groupingo

Mitsui, Mitsubishi, Sumitomo and Uasuda. These and other groups not nearly as large or as powerful, were known collectively and individually by the Japanese term " zalbatsu .

The importance of these organizations to Japan as a whole succinctly expressed by the four- time prime Minister, loshidi

H

2

Shigeru, who, shortly after the start of the occupation, said that "the nation's economic structure had been built by such

old established and major financial concerns . . . , and that

. modern Japan owed her prosperity to their endeavors " Based upon the same pattern of thought that Xoshida verbalized, the political-economic experts of the Allied powers generally felt that the zaiba tsu were largely responsible for Japan's aggression and, as a result, occupation authorities were directed to dissolve them. However, despite dissolution effox-'s these major groupings, by name, still exist today.

Thus, given a background of the tremendous influence of the big business concerns, the research question to be answered is, "Is the zaibatsu system, per se, still operative

in Japan, and. if not;, what has replaced it?" in formula "fei-n-'"' an answer, other questions which have aaterialized are:

(1) What, in reality, is the zaibatsu. how did it develop, and what are its salieat organizational and financial features? (2) What are the social, political and economic conditions and philosophies both b3fore and after the occupation which affected the saibatsu?

It is hoped that the answers t> these questions through the study of the zaibatsni with their interrelated economic, political and social relationships, will assist in gaining a better understanding of the nature and significance of large

Japanese business groups both in the historical and the current sense.

•^The quotation has been extracted from the text of loshlda's entire statement as presented in Eleanor M. Hadley, Antitrust in (Princeton, N. J.: Princeton Universitv Press, 1969 ^3.

3 S£0£e

The scope of research for this thesis has been limited

by several factors. First, due to the author's inability to read either Japanese ideographic script ( kanji ) or the t

current syllabaries ( katakana and hlrareana ) . source data h been necessarily reduced to those publications in .English or

to translations of Japanese works by other persons. By this res trie tion, ituch valuable information may have been loi although a ra ;her extensive bibliography in English has been developed.

The sucond ma 3 or limitation to the scope of thic thesis

is the inconsistency found in Japanese financial data. Fo many years, Japanese business concerns were either not

information, Not until the late 1950s or early 1960s were data

published where comparisons could be clrawn with Western

businesses. However, in that the Japaiese still do not

subscribe to full disclosure and other accounting conventions familiar to the United States, the majority of this recently published material must be viewed as suspect by our sta; ds.

Since a comparative analysis of derived figures was not possible, Japanese financial and other data, as presented by various sources, has been accepted without dispute. Where it

is Important, however, sourc nd/or conflicts in info: Loa have been fully annotated.

4

Organization ana Mechanical Details.

In the writing of this study, the Japanese practice of giving the family name first has been observed where the names appear in the text. References to authors both in the? foot- notes and in the bibliography have followed the standard

Western technique of family name last. In addition, because so many Japanese terms and organizational names have been us'< a glossary of these has been added as Appendix I to facilitate identification.

The thesis has been organized in a fashion to permit a topical approach within a chronological framework. An attempt has been made to maintain historical perspective throughout all the chapters,

of large Japanese business groups and to provide a conceptual framework fron which to expand, Chapter II ex; ines the ^pacirl ownership, financial and structural characteristics of those organizations known as zalbatsu .

The third and fourth chapters letail the historical evolution f bo th ma;Jor and minor zalbatsu fron inception In the early seventeenth century through dissolution subsequent to World War II. The primary purpose of these chapters is to follow the prcgreas of zail .... upings through periods of internal and external maturation and to study, in some detail, their relationship to Japanese political and economic dynamics.

5

Because the Allied conception of these relationships shaped

occupation policy, much emphasis will be placed on actual

zalbatsu involvement with the military-political complex during the 19."50s and the war years. The enactment of programs

to democratize the public and private sectors is studied with a view toward the development of a new framework for the economy and for the emergence of Japan as a world economic power.

The yjars following the termination of the occupation brought forth a new Japan with a viable and modern economy.

In conjunction with the expanding economy came changes in the large business groups and the dynamics of these changes, as well as their relationship to the older zalbatsu organization and control techniques, are examined closely in Chapter V,

Based upon thn facts thereby presented, Chapter VI draws a conclusion as to the lasting effects of the occupation refc. programs In terms of both the existence of the zalbatsu t \ and large business groups of the future.

"

CHA.PTER II

ZAIBAXSy—A CONCEPTUAL FRAMEWORK

Justice Holmes once observed:

A word is not crystal, transparent and

unchanged . It is the slcin of a living thought and may vary greatly in color and content according to the circumstances and the time in which it is used.*

The tfjrm "za ibats u" takes this form in that it means

different things to different people, at different times within

Japan as well as among authorities outside the country,

discussion of the term's various definitions is necessary in

prtiftr t.o pstAiiTish Bonie reference ^oint froK which to ins

the. significance of the "zai batsu .

The most simplistic view of zaibatsu is found in a

dictionary whore it is defined as "a financial combinc=group;

a money (=financial) clique; big business; the plutocracy; a

giant family -irust; a family holding company; a big buslness- man." Ftymo logically, the word is a derivation of zai (money-- wealth; richef!~-a fortune; assets—-property) and bat-gu (a

clique? a faction; a clan).-5 In commo:i Japanese usage,

^Tovrne v, Eisner, 215 U.S. 418 (1917).

- ^Senkichiro Katsu .. ed., Ke:ifc?usha'

EngliBh Pic tlp-nt Cokyo: Kenkyu Ltd., , i: 1954), p.

6

a :

7 zaibatsu has become both a collective noun used as a "virtual synonym for a group of combines""" and a term to identify an 2 individual combine as well.

Whereas the above definitions provide some insight ap

to the general meaning of zaibatsu . they have not developed its special characteristics and it is within this area that,

perhaps j the greatest semantic difficulty occurs. One popular school of thought is that a member of the zaibatsu must be imbued with the following:

(1) Snmifeudal characteristics in that

centralized control rests in a , . . family which extends its power through strategically arranged marriages and other knight-vassal (dedication) relationships. (2) Well-knit, tightly controlled relation- ships among affiliated firms by means of holding companies) interlocking directorships, and

mutual s fcoclrtiol d 1 tksrs .

form of commercial ban!: credit, which is used as the central leverage to extend control in all industries .5

On the other hand, some authors equate zaiV ' to "a lay term referring to the political payer deriving from great wealth, Thi.s definition falls into line with similar

Japanese terms such as kambatsu (official clique or bureau- 5 cracy) and ^ucibatsu (military clique q:: militarists) both of

Eleanor M. Eadley, "Concentrated Business Power in Japan," (unpublished Ph. D, dissertation, Badcliffe College, 1949), p. 3.

-*Kozo Yamamura, Economic Policy in Postwar -n (Berkeley; University of California Press, 19&T), "pp.1 10-1'

Hadley, Business Power ,, p. 5.

5 T . A . Bi s o n t 2a 1 batau 3 ion. In Japan ( B er k e 1 ey University of California Press, 1954), p. 1.

8

which are politically oriented terminology. By use of these perimeters, it is not necessary to include family management as an essential concept. It is, however, necessary to trace the pattern emerging from the generalized term "great wealth" to the specific type of enterprise "combines" as opposed to other types of business organizations such as trusts, cartels, etc. The rationale developed for this equation is derived from the fact that since wealth is a product of concentrated business, and the mechanism of the combine was consistently used b/ the Japanese for this purpose, the, term "zalbatsu" has indirectly come into use to describe ccabJnes, 1

The theory of the involvement and power of large Japanese business groups in the political aent.or has been supported by many authors. G. C. Allen, speaking of the period prior to the Sino»Japanese War of 1937, stated:

2 • • • The advocates of junsen.* ! strengthened their position. Moreover, the immense expenditure on armaments and the fostering of Industries of strategic importance led to the rise of powerful business groups whose fortunes were bound up with the continuance of these policies. These groups " were referred to as the New Zalbatsu. "3

This concept of ties between large Japanese business groups and the political structure has even been extended to the local

^-Hadley, Bu si no s s _Po vgr f p. 3. 2 A contraction of junsenji kel*ai which is defined as a (juasi-wartima economy. 3 George C c Allen, Ji o . Industry; Its R ft n ft r>t. £Q^^2a|n^anl^esent Oon^U^^^Tf^T^lI^tl^troi: Paciiic delations, 1940 ), p. 16.

9 level. In his study of the Ohara zaj-b atsu in Okayama Prefecture,

James A. Kokoris stated that within the Prefecture "elections to the Diet were influenced by Ohara and his supporters."

The face of zalbats u then is like that of a diamond; it n«.« many facets which require that a joint of focus be found that ties the various concepts together. In research so far conducted* thare appears to be only ore point of universal agreement or consensus among all authors. It is that the Mitsui;,

Mitsubishi, Sinai tomo and Xasuda combine s were, in fact, zaibatsu.

Subsequent to this point of agreement the definition has become diffused as witnessed by the following:

But i:i Japanese usage, not all combines are zalbatsu . In the vocabulary of many Japanese, only faiaily-doiiinated. combines are zaj^bajfcsu, though frequently such persons do not consistently abide by their own usage* xhe members of the (Japanese)

Holding Company Liquidation Commission . . . maintained this view (that of family domination) but then proceeded to name Nissan as one of the ten

designated zalbatsu . . . even though Nissan at no point had been family dominated.^

The decision then as to which ousinesses can enjoy the term zry u. is largely arbitrary. Bacause of common conceptual agreement, scope cf operations, explicLt political power patter efficient/effective control mechanisms and similarities to other combine structures, Mitsui, Mitsubishi, Sumitomo and Yasuda will, for the purposes of this thesis, be considered as

James A. Kokoris, "The Ohara ISaibatsu of Okayama, " in

The Occasional Papers (No . 8) of the Center Stud leg , ed. by Iiichard K. Beardsley (Ann Arbor: The ersity of Michigan Press, 1964), p. 55. 2 Hadley, Antitrust , pp. 20-21.

10 exemplifying the z aibatsu although they are not, by any means,

the only groups that constituted zaibajtsu concentrations. To

illustrate this point, although incomplete, Table 1 details business groups that were commonly referred to as zaibatsu

through a period subsequent to World bar II.

Organiz ation and Structure of Zaibatsu Compani es

As wao previously mentioned, zaibatru companies were primarily organized along the lines of a combine (a grouping of companies with a single or limited ownership base and a unified business strategy), but certain unique characteristics differentiated these from the generally accepted Western version of suoh a structure. At the tDp of the combine, there was a honsha (head company) or honz ensaa (family company as in

the case of Y&suda) which might be internally organized as a partnership or as a limited liability company, but which was dominated by the founding family. Externally the honnha was a holding company whose existence was derived from the control of other companies.

The capital of the honsha was (subscribed by the founding

family » which also maintained interests (either controlling or non-controllirg) in selected subsidiaries. The major subsidiaries took various forms; some were straight industrial organizations (either with or without limited investments) while others were holding companies themselves. These

subsidiary holding companies were broken down into two basic

)

11

TABLE 1

ZAIBATSU COMBINES

Old ( P rincipal)

Name Families Persons a

Mitsui 11 1] Mitsubishi 2b 11 Sumitomo 1 4 la sud a 1 10

frSSger — Ha me Persons 3,

Asa no 4 Furukawa 1 Kawasaki Matsushita Nakagawa 1 Normura 4

W **.W VIA*. Okura Shibusiwa

Shlnl :o (NewT

Name Persons'

Nakajima (Fuji Indus) 5 'Nissan (Aikawr. 1 Nisso Nitchitsu Mori

Ih iable to Classify

Nai ta Ishihara Iwai Kuhara Ohara,

aZalbatsu persons as designated by the HCLC lor divestiture of stock and working restrictions (sec Chapter T TT \ "Iwasaki Families. Actually in the Purukawa family circle by marriage, but listed separately by the HCLC. Source: Combined by the vrriter from all appropriate sources as noted in the .Bibliography.

: n

12 types: first, the "pure" variety which was non-operating in that it was organized solely for the purpose of investing capital in the stocks of other companies and by doing so, either directly or indirectly, controlled these organizations; second, the "mixed" type which was itself an operating company. Thus, a chain style financial complex was developed where families had controlling amounts of stock in the hone ha . who in turn hold large blocks of stocks in subsidiaries to

which were added the direct stock holdings by the families > as well as "crosn ownership holdings between subsidiaries.""

Indicative of this type of control pattern was the information submitted by the Mitsui combine to the Supreme Commander for the Allied JPorces (hereafter known as SOAP) in 1946 as shown below

Dos crip tio Number of Companies

Top holding company 1

Designated subsidiaries ("first line" and "second line") of the top holc.ing company. 22

Subsidiaries of the designated subsidiaries; except Trading & Mining 81

Subsidiaries cf Mitsui Trading 60

Subsidiaries of Mitsui Mining 31

^Definitions of "pure" and "mixed" holding compi were derived from the > .^cyclopedic Dictio nary of B usiness (

York: Prentice -Hall, Inc . , 1952), p. 3oo7"

2Hadley, Aj^jrrug;t, p. 28.

13

Description Number of Companies

Ordinary subsidiaries of the top holding company 50

Subsidiaries of the ordinary subsidiaries of the top holding company 27

Total 272

Charts I, II, III and IV illustrate the entire organizational structure and internal financial ties of the

Mitsui, Mitsubichi, Sumitomo, and lasuda zalbatsu. respectively, in 1946.

Although shares in various hQJjsha were offered for public sale, the ownership base was net widely distributed beyond the fanily and the companies it controlled (Table 2).

Outside owners were mainly top executive personnel of the

^SuLfel!u^jd» some high echelon government officials, and members of the imperial household.

Decisions concerning business policy were made in family councils, and the honsha dicta t3d these policies to the subsidiaries, family councils also appointed key honsha personnel, and. strong kinship ties (although some of them were ceremonip.l anc. fictitious) more than stock ownership, kept the combine a tightly unified organization. Due to traditional

Japanese concepts of superior-inferior relationships within the social framework and kazoku seldo (family system), the family demanded and received loyalty and obligation throughout the complex hierarchy of the combine which served as a primary

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''v;: ' , i| ,:i;.!J| M ( 3Ami CAPLZ-VAT 1 100$ SAITOH! ?J BUlLfllr'-J U 800,0X1) IWISSSHIRO

r 1,180,000 OIL & TAt CHXK1CAL IHDU3TKT a&$ OtOOA OH, HWI3T3I (I SOO.CCC) 120, COO, 000 UJ-LOIIATIOS M.6% 8ITT30 OH WTiaJfiT (I 2. SCO, WO) 20$ BTOOO C0W3CJ,inA?fc> CAJII3 DOOM (I 500,000) 15.3$ (A!OGA«A PHU7i3I^3 (I 1, 300,000} 100$ K1IQA7A COLD SWHiOJ (-1 250,000) 100$ aimo Tf-issPCKti7i;j (i 300,000} 18. IfTSlHOHIU lOP BI33 (I SCO, 000) 2$ ;IK-3U^I l, :60,OOOJ ic-i uuu colo arcitos (I 500,000) i 12,603,000 20$ HOKIAIEO CU(Si3 W033 U 400,000} 70$ SIS-A KiCHlffBitI (I 5O0.CCO) 17.6$ WnO-I£JJfJ?OJ.TAri.-;Jl (I 1,600,000) &C* 'tAIVU COCCOU KTO. U 600,000)* 82$ A10I KOHM (I 1M.400) 45$ Eonari ixwj-rd-LAL (i 200.000) 60$ BOIEAI !'. 5XS -aTISIPTIC HOWS (I 100.000) 24.3$ CSODA SlIAKSEIP (J 190,000) 86$ ITO LUMEit [t 425,000) 10$ CEcsjEM rcn, U a.cco.oco) 60$ I6EUU 1 J22I5!* BUSH, (* 87,600) 11.3* OHGSSH DAIDG 3THL HJO. {» 2,000.000) 60$ IZIW LDX312 U 75.000) 24.5)1 CBfBBJ TOBACCO K?iJ. (» eCQ.CCC) 50$ HISEJ LT3UZR (-1 tOO, 000) 70$ KAS3HU n.OAfi!W MBit f"?0. U 1,000,000) 50$ KklCCTHU FinfOOD (J 2,500,000) SO* CH03M 3tUC WO. U 600,000) 4b$ soy2v£M E.7:*£:o*ii3E (x 1,576,000) 20$ RAS-XQ JSASCS-U. HiiC'TSCJa DITXLCPV3S? (l 5,CCO,00O) 16$ 80'JT_3j; LUKBXS (J 446,000) 10O? lOTOO CLOTEIl/0 KJ3. U 75C.COOJ 90$ SiE530 PiCnilO (I 460,000) 47.5$ MA5SHV SM3TU WO. (J 2,000,000) 66$ RASV.: LUKSE () IJW.COO) 965 rro«A TOBACCO U 5,4<30,0CC) 100$ KUKliU UKSia (I 1B0.OO0) 80*1 Ki£S2U JODOd HTO. (* 250,000) J 120,(00,00-: 100$ SAHTAl ISS'JBmAL (5f 1,500,000) AIRCHAJT ICC* USD SAiTAI-SAS (j 600.000) 25. &$ BAJUJIS CEMTiT U 10.W3.0CO) 96$ 33UJ0SII JSBCUBT KTG. (I 4,350,000) 45$ OailiTAJ. CJ.FiIEE jaOIKtSBISO (l fiM.OOO) 41,7$ H135EV MOTOB K70. (I S.COO.CCC) * 39.5OO.0C 92$ lon-a sijsl flpi wo. (j eco.ooo) 27.7$ KAlHAU «LD COCCO.f SILK (J 30,000) aiBl'l ITUJICS KTO. (? 4,000.000) 40 8HIHS0 OH E2TIIS2I (I 1,000*000) 70$_ MDO SirTi. PIPE K3M. (* 100, 33$ TOA EW COLD 3TC*ajl03 (7 2. 600,000) 100$ iuxc^plu ias a *t!i3isi3Bii:a (t 1.000,000) 365 UJITSC SM COLD 3?0aiGJ (I 6.0CO.00O) 33, 7$ XAUUJI BUSSAS (I 400,000) 49,1$ SHAKOHii UlBKHOISS (3 3.000,000) 5AJ5H0 IUOCT K03HJ (I 1,000,000) 60$ ui&ao 20* 3IHH CHSUCAL (3 6,000,000) 'XUVS A TLE1 45. 6J uisiru misiko (J 1,000,000) IFSUPAHCS 46.8$ tADiU PETil5ICS ITOtiSTSI {* S, 000, 000) 30$ SJJTTO CH2UCJJ, (I 6,EC0.0C0) ' 60$ lAi'Iii KASEIKS 1KDC5IBI (« 3, ECO.OOO) 14.3$ CHUSA SOBiCCO (T 33,700,000) 6.7K-.000 MITSUI 27.5$ EOKA ED9BXE 1SD*^TEI 13 750,000) 10$ T31B0TAO IAQ3 SUrfLI (« 3,003,000) aa.2jt ttuoru ct^ical ibdubtoi 4».ooo) 100$ aiTGoxu tobacco kto. ko.cco) u U 97.6$ riOVi SEOIO (J 200,000) 60$ tOA 3A1.? UT3. (J* 2,000,000) FAMILIES 90$ aKJ3AJJ RlX3I!3ar (* WO.OOO) 10.2* 3AJTXI SALT KM. 6,000,000) U 58.^ IAJUECI-C21 AJ3DFUJ1 (l 378,000) 20,8$ tAffTZU KJXUSI 1033 1 (I 2.7CO.OOO) 35.1$ niffiSD 93IP8UlIJ)ISa (S &40.CO0) 56$ torouisaixi iaoc Names (j 3,6X,oco) 60$ ESliAiAil V*XAfni3 660,000) 10$ lHDO-cHijtA paca?atre kihiig (? 250,000) U 61. -rf fiiliyfAXAX 3. 8. (? 1, COO. 000) 54$ OODO R41C3 t$ 31.000) 300% iw>*j3'm 75$ OCilAS 1WSSK (* 100,000) iw$ foro 3eoio (i ?eo,coo) 100$ TOIC JW7B KIU (Jf 2,000,000) «IA ioo$ aiursco wnra scssas (e.k. 1,000,000) * 1,M>3.000 60.2$ FWKJ3 HUL (I 7,000, CCO) lCO$ TflASCAISS 3'J33AS (fr S, 000,00)) («,&-i 6«»d tj KIt-iiil B^ciui) UiaiO 100$ Hir6UI BUS-JAJI 30CT:* A7BIU ( 3A & 15,000) 60$ n03 KIU t* 10,000,000) 100$ »OEsI ccv.' .:; a rt U KO.COO) S6$ EAK-fi nCTJB HILL (l 600. OCO) 100$ 30CItDAD C0KK2?..;iAL CUILIU HJOHAX I? 120,000) (lt$ onuJ bj- Wttui Bj.cou) 100$ 80CIEUO C0«XI2C1AL JIFFCE-FP-UILXIEA (X 50,000) 100-$ Hirsui * co. sn ixalahd (k a l.coo) MITSUI 66.9-$ B11CUIKLI EaUOttHJ (I 1,300,000) 32.7$ B0CT-A1 STUW3IP (T 6,160,000) HONSHA *0.?$ SAIWI SSJCiEl? U 13.162,000) 46.3$ «H0 sr_'WEIP (I 18.3e0.O00) 20$ SID3 SHLPBttllOlIJO (I 5,000,000) 86.9$ H1S0 IKKiBlHT fX £0,620,000) SAStLi 10,000,000) 23.3"$ SIPP03 BUUJ (I 7, 500,000) 66$ BORU U ^400,224,7501 !JI CCiSWISl 3KIP (I 15,030,000) 10.5-5 B1O0 IWUSfTUAL U 1.300,000) W.6$ WW 14.6^ l«L I B-m^iU? (» 6,100,000) 31JS CSta HOTT 1*5(0 TET (* 2,0O0;0CO)

100$ UJUJ3--1 HIlilBO (3 20.000,CC0' BAseaj xnnoo (t 5,099.000) «$ TAISJHTO COAi "^IKIJ'a U 11,000,000) 66$ CWK-J £ZL\-ri23S BTISL TASlUCtriOTI C< 180,000) JUTSraillKA CCXL Kill SO (1 2,S-J0,0C0) 66$ tAUf^ UreaffilAl C0KEtJ3?I0S It 300,000) 31$ CffiLia-l COAL HI3I33 U 7,000,ow voaxa (i 350,000) L|6£N£ 17$ SISiO-BIPPOIf CHWICAL [ill. (I 90,000) 60$ KAVAIAMI ?ABtyi£J!£lP (j 5,000,000) 76$ fliaii PAawaassiP (? 4,000,000) 3AJJT0 I 16$ COITSSU. PABTOK-SaiP (l 7*3,917) INDICATES DIRfXT HOLDINGS OIL A ti.T ^8^0-Aj 70$ Xiuzi PAarais.*iaiP (i to.oco) IKDD3TSI COAL OF THE MITSUI FAMILIES 26$ KIKES «AT210A13 ACCCMtLATIOS ! (I 2 i &'M,0O0) INDICATES HOLDINGS OF THE Till'- [v;:['!;'^.lM MITSUI HONSHA INDICATES iNTErvLOGKINOS INTERESTS AMONG SUBSIDIARIES SUBSIDIARIES AND SUB-SUBSIDIARIES

I 3-t.6$ TOKO HIGH PSZ93UB8 (I '.%, 350,000) OF THE MITSUI FAMILIES AND THE 1-1.-7$ SalJUSB CltSHICJJ. ISD'JS-niUa {J 15,000,000) CHtXICAL 2*.-y$ tqa aiBmnc uumical iro. (i w.aao.ooo) IHDUSTRT MITSUI HONSHA ON 01.6$ H3I0 3QHA 1HDUSISUJ> (2 30,000.000) X B, 000,000 K>$ tAiaiD CT0M1CAL [!G)iJ3*rB.UL (I 10,000,000) 31 JANUARY 1946 ' CAH7AL AHl> ; ?Ji--i.:U . JAPAN souacsi aiTiui hck^ha

FCBflUARV 46 GHQ "SCAP NUMBER 48

I 1 C (t )

MA*aiwu» optical ikd. ix- 2,000,000) hits s:shi ) HorJTO UOKaI. LID. IX l.OOC.OCO) ITO. (I fQSTQ HATCH C. . 1,090,000) 100$ IOTOKUBaB CC., LTD. (IO0r) (X 3,000,000) CO. (X 200,000) MITSUBISHI UIHO 1-ltCML-illLI ic i BaXODATI iVZL OIL Tj>1 CO., LTD. I J i«0,OCO) ATiiil IH^H CO. (I 1.200,000) UTAH K IITOSUMI SAW KILUs Cft., LTD. (X 4C3.O0Q) TCCTO HOW MIt»L WUH13 I* 6.000,000) ICO* TCa PHOSPHATE HOCX CO., LTD. tl 1- , | MACHIM r-' 1J MO. Ill, i.OOO] 1ITU j ioM COKJ l.'-r:- AS13CIU PTT., LTD. (t 1.6C0.CO0) 50., LTD. [t 190,000) INTERESTS HOU KACII1BI 60> Utisnu nora kills co., lte. (x 1.000,000) «Xi FXHV. CO. II 300,000) KAHCHUBlAB HICi CO., LTD. (X 926,000) 63. 00 ]t tc^ax iiri:7:,r.-ai (x coo.oco) IHDCSTHAl BVJUB PAPiB K70. CC. (X 250,000) ;.r, ;zu rcris i^iicrLrjfix co. has lKY*snaa,Ts TOA MICA CO. (I ) KilAOArfA CO. is Tvxrr-ir-.T: cacisics Xv/r listid) HACBlBTOiT (X 3,600,000) S0UTHXBJ1 TivaI'ISO CO. (r 3B.67 i K1T4OTS3I i*.tirXKlU3 (X 10,7*8,000) PACITIC 5,000,000) KASCHURIAK (1KB K1T3ISJS3I PAJ7J

SC^AB UITTIHO AMD vtATISC CC. , LTD. (I 2,00D,CC0) 3HIM120 FHABKACrJTICAL CO., LTD. (X 190,000) i SEOVJ TKAD1S0 CO. (X 15,000,000) 70IU33IHA SHIPBUILDING CO. (I 1,000,000) rtlTSUIISKI BiD-ji rw\ra kills co. (x 7,ooo,o&0) I 100,000,000 SHASSI OliUSIH'S MITSUBISHI THADIW (I 100,000,000-) J>JAi CCHJ SALT CE»ICaL (X 6,500,000) I SSIliDO l-RODUCIS P.'K? HTC. CO., LTD. (X 1,000,000) IWASAKI nCRIA 5TT3. HILLS, LTD. (X 2,500,000) CHV3IA MITSUBISHI MACHISTS TOOL (I 20,000,000) KAV-.'EUBIAH COIOi'IAL IE). CO. J 7,600,000 (X 1,126, COO) U±± TOSHltAXA CF3MICAL 1BD. KACB. (X 2,000,000) JUEffl SHCIAI CO. (I 1,200,000) STLAKiBIP {J 70.O.O.COQ) FAMILIES HITSUBISKI V 6 * IO^aS KaBIST; ?B0XCTS CULTITjaiM (I 16,500.000) I MDUSTRIU. (I l.OCO.OOO; » > IWI f X 20,000,000 MITSUEISSI TOBKOSaB CHrf,ICAL ISBD3TFI CO. (X 10,500,000) |j ,...'*.->.. ru r„. K.. inv«»Mi>n af !• Ihu 10* SHAHCflAI TOT-i DBT BAT TEST CO., LTD. (J 460,000) VA&IHOUSX rCJJOSAH AGF.ICtir.5AL D2'.T,L0r«Ci^ CO. (X 4ec,000) iCMOBI CaHBICS 30C2S CO., LTD. (J 1,350,000) Ja?;JT aCHICU;.TUKaL CeOBT (X lO.OCC.OCO) TCA OIL 5EXD9 IKPOBI CO. (X IBO.COOJ CCBTRCL 00. (I 20,000, OOO) 19 53* JAFAB MABJSH^OSS Atv-CKO ABXS ISD. CC.. LTD. (X E.CCO.OCO) tARsH'.ass aaifPUio, ltd. (x to.oco) ialee* coaia KITSUBl.^il TorrO E3C? SflBVIlS CO. (X 10.OO0.CO0) toa talus co., ltd. (x 5,000,000) hnt lnT«»tn»ot» of l««i th*n n:.*i (HltwiUtHl *ar«houii« MITSUBISHI toa tea kto. co. (i eco.oco) xhlch »r. not ll»toi hers. 1SDUST31A1 lp* U 20 o|h»f ctwp*nlfl« 23;* MACBISHET Kti, CO. (X 1,000,000) H N S H A KaKCHVBXAI EDO- IKD. CO. (X 12,000,000) TEA! CPIKICAL ISrWSTBTIS CO. (Baa! 600,000) MJJfCHUBlAB-K^VCOLIAB I'iT^AL BZ^UvCtS CO. (X 6,000,000' ¥ 240,000,000 COBaI; CH3SICAL IKD. CO. (I 3,0CC,CO0) 4 MITSUBISHI HISIKO (X .107, -too, 000) L_J kitihWa autouvbiia re. (x iro.coo) * MITSUBISHI TRaCISO (X 100,000,000) X 135,000,000 KLICr^ICAL £ MITSUBISHI bXM (X 135,000,000) OIUOBI JBCOIVZSUU) (X 750,000) hiWI Lift JAP.Ji CU:y^ SOOLb COSTaOUIJW (I 6,500,000) JAF.Jt MATCH EXfOHT (I 1,500,000) I 14,00-3,000 6;S TOTtO HAXABO BAiX (X 625,000) Trail ag Co., lav. > Of 1*! tOOS TCai CO., LTD. (J 60.000) ICO* TtiBJJ LTO, CO. (I 600,000) X03HIB BA'tt (X 600,000) MITSlHilSiO 13* TOZCEilU -. '.:: ,<.:-: ,r/x> 13* 70A COCOSOIAI LSTXLLIOll'Cl EUB3AU (I 500,000) HPPCS AXUXloVM 1« lAfllOO L*S3 (X 92.7SO,000) HJUJCliUEU (?r e.zeo.cco) £8jl Buiita reijjciiai-jAPOjaisB KITSU3ISHI * 1JTSUB1SB1 HXiTt laXUSTRI (I 1,000, £U0Ib'kLAiy9 f IJTSUiI5HI MI1.1K0 (X 407,400, COO) I IJT5U2I5S1 BA.'.t (X 135, OX, 000) «t*d h»r«.) IITSULISHI ClL (X 20,000,COO; V 20,000,000 f, KITS -.'-;--'-! MIT SUE I SHI tc?u> 110. KsHCBUfilAH MITSOBISai KACi!I!3 TOOL (X 20, 1,000) tDUTT- AiT^LCiri $ i T.iKaJJ IKEUSTBX (X 3,000,000) ? 4 MIT3&ISHI HOHSHA (J 240,000,000) IOTU3TRIS3 ! i *: ikpjstbi (x 2,000,000) KXAYT IKDUSTBt (X 1,000,000.000) 150. b:itob i 7 it JUSTSniSa: f mitsubishi steamssip (x 70.000,000) G 7 i MITSUBISHI TRUST (X 30,000,000) X1,OOO.CCO,000 $ JtPAH COEH PECiDUCTS (X 77,600,000) e X 120,000,000 i SPJSGHAI KITSUBIEil *A. J3CVSl {* 1,000,000) v, HAHIJit 4 ?IhB Ib'SUBAJICS (I 80,000,000) 2 J TOKYO i rjJl ILTJSIBT (X 1,000,000) ?.too,coo TtAlj 10.0 * rUJI Lire ••J-^yg {x_ ) klTSUBISHI LIGHT ALLOT KJG. (X 14,000.000) J 110, 790,000 { ' Lvr-vu*- ;! - xLUXIEDM (X fO. *"oO,000) 15? JAPAS OTESIl EST TEC3T CO, (X 1,000,000) istustrt KAcaiSEin (x 20,boo .000) co. i h:rcmi7Hi ckami:al Truis C 0., ltd. ha* lnToctsoUt of f jM«M f. hi Pi-:;* A.-auTic:i- i-AL :r".:i, (x 20.000 .030J , tc:...\ lata tfcu 10* In 4 Jthjr cearialos which aro no! litte 1 hor a .)

'" MITSUBISHI HIPPCS I

". - . 6 J MITSUBISHI HCKSSA (X 240,000.000) MiTSuaism . AP.CHI7EC7JRAL 7 * MITSUBISHI EZAYT ISWSTHT (X 1,000,000,000) vAisxaiuw 6 * MITSUBISHI MIWISO IX 407,400,000) IKDUSTHt » 20,600,000 100*: BIW.1 CDAL EAllECAD (X 1,800,000) 1 * MITSUBISHI TZlADISO (X 100,000,000) > icoS Br^sfiiao babj 6 varbsocss tx a, coo. coo) i MITSUBISHI BASK. (X 135.000.000) : s, ooo, ooo l"Ut COJLLGT iX 10,000,000) S * MITSUBISHI ELECTRIC (I IK), 000, 000) J 1004 eK*Td 3ASEALLI I COLLIIST A COAL BA1L3CAD (X 10.0OO.0OO) 1 J MITSUBISHI ISTATJ (X 18,500,000) 10C4 TUBBTSU I— CCiL HAIL (X 1,000,000) I * MITSUBISHI CK2HICJU, (X 110,790,000) 63H t^BIBABA COAL M1HIB0 (X 6,000,000) I * MITSUBISHI STZIL (X 100,000,000) 60* B30TCXU .04 •). MITSUilSMI SCESHA (X 340,000.000) 64$ HLBTZO 8TIBL HTO. (X 6,000,000) l.7 MITSbllShil t Hi-.'iT IVLUSTftJ U 1,000,000) 61< BOAJ CHBUCAL IjJD. (X 2,260,000) * HIPPOS ALCMIKUM (J 60,000,000) .7 $ hiTsiraisai Ti^ij.;j [x 100,000,000) boi f.ura-rcu coLLitnr (coal) (x ao, 000,000) < JAPAS OPTICAL ISEUSTHT (X £0,000,000) 50i MC4AS LBOS KIBl DXTP. (X 60,000,000) I lorto mariss abd nas issvax-scs (* bo, 000,000) 01 $ K1TSUBISHI H0Mi3i (( 210,000,000) 5 i kAA'CHUaiAi' hITSUSlSBI Ij^HIHS Tot OiAEU CCAL CO. (I 300,000) % MITSUBISHI FiPiH MILLS (* iO, 738,000) TOOL (X 20. 000, 003)t MITSUBISai KiA'.r I7.U!STEr (X 1,000,000) CCLLIC2T (COAL) (X 23,800,000) 2 * MITSUBISHI CKEhlCU IIOJ. MAC H 11.131 (X 20, SCO, 60< HiBU-UI 2 $ MITSUBISHI TaAlIli'O (S 3,000,000) OOLD (X 10,7t3,OOO) $ lilPPOK AhC>il?iCr:(33) 53* BIIEEV ce< rcExcem dock 4 ocsstBUCsicai co. (t 6,000,000) L;: 3^s M1SIBG KACS1ST CO. (I 120,000) i pjji unwsrauj. f*' l.ooo.oco) Ui UUiUVl HSTAU (PItE) UD. CO. (X 800,000) 254 KAHA3A1I COAL HIBIK3 (I 8,&X),D00) HAC3. (X 20,600,0' * MITSUBISHI CESMCAL ISDUSTEUL B'STifTTICI (X 6,000,000) eo-4 nAtttua mca woKifl ti 3.000,000) HIIFtS COBALT KUtlHO l» f-CO.OOO) 1S< OUl MIBLBG 0OC33 $ MITSUBISHI KAJISSITj-M IKWSTST (X 6,000,000) COC, 000} t-X HIBOSSDU CABtDO 1ST). CO. (I 190,000) KOSIAJ/ CtSTHAL UJKTR1C RTO. (X 400,000) lilt- VB1BAJ CCA1 CCLLItHT (I 13, MITSUBISHI IVAJ'OrUd'O MTO, (X 16.000,000) fli ituaaj MACaUH TCOJ CO. (J l.OOO.COO) % TASUSAVA AIBCBAJT RLSCTBIC CC. (J 10,000,000) lit 1VATX HLH1SG MACHIBXiT (I 5,CS6|«00) * JAPJJt OPTICAL 1MWSTRY (I 60,000,000) * 3--i lEBiil 1TTOM0BILS HTC. CO. (J 16,000,000) KAKAHO CCPPKR tlHl '.Cfc>3 LTD. (X 375.0COJ 10.3* TTSUAAtA KLXCTBIC (I 100,000,000) "I >.u;riATT KM. CO. (* 6,000,000) HIKAEU .-EECISX KACKIXXSX it 1^3,750,000) Bi It: , Ltd. BOt >:T8C3ISD1 IDCaWT L'JXKtH (» 1,600,000) lAXBIDO EUBfiXH CC. LTD. (X 1,150,000) TOTC BLSCTHIC CO. (H 2,000,000) (MltroMthl Minion X-* 1XPI2I1L APC£LK CO. (J 8,000,000) A3AUI CU33 SALES CO., LTD. Vi 2,600,000) HIWO kliCTlvJC WQHBS ITD. (X 1.600,000) •.j l.cXi.OOO) i3ca rar»s icra. co. (« 3.000.000) 3HA0 HiO CUSS CC, (X 4,600,000) BYOSAH KLU1 CMC, kCHlS ITD. (X ;:* DiiesL ALtCHArr co. (i 3,000,000) coisxciiw co. (1 9,000.000) nOBI EBADIWG CO., LTD. IX 160,000) Totro naiHucon :: UCS KOI3 {I 1,200,000) IIPPOH CAHBOSIC ACID ISD. CO. {% 124,000) TSUDA wUJi K». ZO. (I 760.000) r" 31* dCRXV TOXIC BEBE VCEX3 KlTSlilSal TBADIKO (X 100,003,300) MM. {X 5,700,000) LIC3 0!I. & **31S CO., LTD. [X 3,500,000) LTD. (I 300, COC) ES BASI (I 135,000,000) I5tU KUTT-IED. CO. (X 11.000,000) KAHCauaiA 8CJDA OO., LTD. (X 18,260,0CO) •umix ALicEAJT urj'MUoaiT (x 10.000,000) klfSBBISHl 2.1 KJ-J4.IC (X 20,000,000) DBT PUT8 IKD. CO. (r 1,000,000) TCTO 0EIHD3TCS1C ITD. CO.. LTD. (X 1,000 ,000) TEBAUCHI wcaifl LTD. (X 3,600,000) MJTSU3JSHI OIL XTi (X TK, SBCI K4CHIM WO. CO. (X 1,000,000) SODA CSjyiCAL WHO C037H0L CO. {X 2,000,000) BHIEOIXBA Xl^CTBIC VCHtiJ (I 1 ,000.000) MITSUBISHI CBXXICAL 110, 000) 1'i J1PX3 HLTTI3T CO. (I 20,000.000) SIPPCU PLATS OUl IS 00., LTD. (I 12.260,000) BICSrIO ILSCTRIC V03A3 LTD. (I 700,000) t aro. co, (3 7,000,000) HU8E&) CHXKICA4. :j.-0. CO. (X 2,3£0,000) TAH1MCT0 FOUIDBT kCLLB LTD. (I 1.000,000) IUJI 1KXUSTR1AL (X 1,000,000) ro, l.ooo.oco) (x IOKAI IKDOSTBI C~i., I.ID. (OLAflS) (X 1,000, COO) TOCTC BLRS UK. CO. (J 3,750,000) |».< MITSUBISHI LIOHT ALLOT MIO. (X 14,000,000) &] tiNB & jkcacpuire (x 3,600,000) IXJH1AH PLATS OLA33 2a1.S3 CO. (X 600,000) aUAK r'JIKiL?!!, OC. (X 2,600.000) BIPPOK ALOMUUH (I 60,000,000) IC-t ALE CEWIClL IUD. (X 1, £00,000) KJIO CARD03 CO., (X 3,000,000) ' ICSJtAH MICA DXTZLCC. 6ALBS (I 2.260,000) KCaxAH Asr;jiKACin (x to. 000,000) k.-i .'APJJ MACUlin 1ID. (KICTCLJ) [X 40.000,000) TAEXDA ChlMICAL tDEiD) TOnO BATT13T CO. (I 4M.00O) ?o, &», oooj I CO., LTD. (X 9 t 0f.O.0CO) MITSUBISHI CBMCAL IBDIiSI hial ka:h. (r 60* SOUTH KAyCHUaL) CHJMICAL 1SD. (X 2,600,000) lUOvri ELICTBIC ifCtifl LTD. (I 1.100,000) UB CO., j_ro. (» ft.ECO.OCO lyo«i) TCOJLKl ELECTBIC VCZAB (I 4.050.CO0) CCHTHOL S CiOHICAL IhD. CO. II 30, 000. BTAJiDAJiP tLB. MACBIW SUJ-rt-T (T 1,000,000) IW«-ttiCTBIC '»»Trtl*a« CO. (X 2,CO0,0OO) - I BlfKM pUBJ DB003 CO.. VtO,'{t 500,000) DAI SLVP-'M PAIfcT CO. '(X e ,00,000) .6 < tUtsUBISKI C£«1CALOtlCAL ((X 112.790,000) r TOTO BX1CTBI0 Ml^i. (I 8,000.000) jutlthl Chi*uicul Inrt. Ltd. has lnve*tamt* of !•<• KTO. (X l.OX.COO) MilSOBISHI NIS'I.T, IX 407,40*. 000) ICf, In 28 ?th»r conj*«nU§ Qit llit«1 hor*.') TOXTCs-fJt^rfilC

AAMi'iAXA »\>BB. CO , (X 900,000) MITSUBISHI TBADISO (X 100,000,000) 100* TSUkUTA (X 210.000) 25.0 KCB.03AH ILKTB1C MTO. (I 18.900,000) HIISUBISHI StSKL (X 100,000,000) 68* BIBBHIX rOX A KABIBI 1J3ELUC1 (X 13,000.000) bi:c«a cABua co. (x 1, boo. coo) 60* JAJ'AB ATC9AJB trOUBTHO LTD. (I 60,000)

I MAJtCmraiAB MITSUBISHI MACRIU1 1.000,000} U HOT S3 tO< BHHXC BUILDIBO CO. (X 1,000,000) . . i,... Mf C Co I 1.2 rapoKAt kAiiijr* in. co. (x 1,000,000) ,. . tnx -co, 000) 1. CCUPAHIB3 LISTHJ IH 50L10 DOXBa AEj", 3JB3IDIAXL33 oHOSit D'JttCI COVtlOt fji p^hCIT 39i a 3 KITSWaiSBI CeXMlCAL ISru^rRIXL KaCH. (X 20,6C*3,COO)l H'jLOIMt; C0W7AVT 03 VB:*£K ClKTKOL 0? SUD3IDIAi(183 Of r"j; PAassr UOLODl M* KABCWIU rlHJ A KAfltm US. CO. IX 6.000.000) I - 80.0 BOJtr.3 ' riBB A MAJilKB US. CO. (S 10,000,000) 2, COHl'lHIBS LIdTE3 IH DA3H ABJt COUPAJIIBS IH niCH THii IBAi I ' 26* DA18BT M.O LTD. (X 26 .COO. 000 I MITSL'BISHI IWW8(U OB IT3 S'JB3IDlyJil23 HAVE IH'/li3TUi!IT3. 27* TOA TIBS A MABJlrk IBS. CC. 1. 311OT LHfTED IH TBI SHOU PAID-UP CAPJfit.. .*» MLrr\M »**.»»-<» to, C* o.i^j.v-^j* I l.J .01 MITSUBISHI RGBSKA 340,009,000) t .:.:- I riB5 [HSinUHCE (X 50, 000,000) 4. pF«';arAi.J S irw TJS AJIJ-MT OF 3T0C1 :(3LD 8T U1TSU9I3HI CuSCUHK, f. U 16i DAItU riBl A hii'll ]*". (X 2,000,000) .001* MITSUBISHI hi/Vi i:;-.L:,:I (I 1,000,000,000, I s. c,ut*im jaiuj-oh;*MT ckjoj -iC'U>n.'us aucso avuaiDiAHiM aki hot 3,o«. -H ni TOITOALAUI (X l.OTXJ.OOO) .J rBAOIHO .a % MITSUBISHI (1 100,000,000) 11* TAIOHO KAilM A rout IS). CO. (X 21.000,000) .2 i MITSUBISHI tLiCTKlC (X 120,000,000) SOURCE- MITSUBISHI H0N3HA (totjft Mario. A Pirn In.%rtoe» Oft., Li*. U> U»*^-

FCBRUARY <; G GHQ SCAP NUMBER 40

1 ) I

sTsl I mj 364 Sim>I irftSTVm T13K CO., LTD. (* •) K-fthlO fUt. SUMITOMO TATICE CO.

t>74 IfklJIM-OUMI CD.. LTD. (1 •) n .1UMIT0M0 MIKIMO (I 80,000,000) INTERFSTS j SUMITOMO LiMK U 73,676,000) SUMITOMO ALUMISUM LtDUCTICS (f 20,000.000) SUMITOMO KACHIfcEkT »;£K3 { 40,000,000) SUMITOMO C1KM1CAL (V 110, Of<0, 000) 3UMITCK0 EL.ICRUC IKDUST81IS (J IPO, 000,000)

SUMIT0M3! I 2> HI7AL IKDUSTBJIS (I 41.8, 7£0, 000) lrt C "-?:,:5J- 7 ' ILKTaJC^P_yW (t 20,000.000) srvraaric ^ y.?-£. OPTICAL IH5 THU!

100> TOI 8TOTH1TIC CHIXICaL IH). LTD.

FAMILIES 16* TOHOKU CLtVOOD KU£JtS, LIE. i hlPrOa IRCB tfORXS, LID. (J( 3CO.OOO) CHCSCM 32> HIFF01 SIlfBoaiC 1LKSJM xcaig (J •)

SUFOS CUSS llfiRK CC. , LTD. (1 •) . 324 JIPPCJ hZTAL MCLD VCEAS, SUMITOMO LTi . (1 ) i;:lits ivojstsi co., ltd. LIGHT MXTAL CO., LTD. X 60,000,000 (34%) 05A13-SUMITOMO CI JBUTOMO TAaX. < » 73.67*. OOP MAF.lirt & I1P-E ) SUMITOMO ( IESUPJ^CK CO., HONSHA V "~1 REDUCTION CO., LTD. 300,000,000

; 1 30,000,000 k INDUSTJtIAL (X *)

jUXITCNO LIGHT KSTAL (X SCO, 000, 000) 5$ WTOS litx issue- X BO.Ono.COO SUMITOMO CO-OPEHATI'/U JXSCiTnC F0VK1 (» 20,000,000} I | 9* Alice CO. ,LTD. TOTO CCMKUSlClflOS APPAEATUfl (X 15,000,000) 12$ CauaBS SUMITOMO LIGHT KiTALfX 80,OJQ,000) ir ABEIT30 SLLCT7UC (I 10.000,000) F" I LjS M1PP0B COHMTJIICA.TICM IRPU3TST {» 10,000,000) JKHOi n.U0BJT2 HU'tn {4 2, OCO, 000) CEIMJCAL

HCETB CHIHA COLD MIHIItO (J 1,7^,000) LTD. I

TOI MISI30 (J 3,fi00, OCO) I (X P0.C-3O.O00) I ( 110.000,000 DAI-SIHCS MIBISO CO. (J 5,000,0*)) IAS 1 1 1_£^C TilO_F ~£2j X_20 , CO0rtX)0) capjiieb la. zf, sippcs aircraft (x m.oco.ooo) TIliCCCD CCM7?JS3£D 0A3 (| •) 30,000, oco) 2$ hippos music KsraiMcrr (x TlirCW SPLOLAL STHL (I 23,000,000) niciaic apparatus (i 3,oco,ooo) t 418,750,000 20$ Hissam KAScrimiAS Licnr kltal allot !;rju3TJlt (' m.ooc-.ooo) TXIfOflJ SPECIAL STEZL WO. (* 26, COO, 000) 10$ I 25? SUMITOMO MiTAL iHDCSTaT OT MASCItffllA (* 30,000,000) COXMUKICATtCa APPARATUS (I It ,000,000 7$ TOTO 1 * ILPPOH MWC IKSTBUHIIIT WO. (S 30,000.t00) SUMITOMO I r" hi HPPCOJ C0MMV3ICATICB IWWSTBI35 (T 10,000,000) ELZCTBIC OELLfiAL fiI72L0C( ISiCSTUAL {» •) 36i BASHIHAMl DOCX CO. (I l,t 104 TCSAI BUBBSR ISDU3THT £* 5.000,000) * 7.V675.0OO liDUSTRIES RliXT METAL IHDU3TBJI3 (X 14, 000, COO) i 4$ SUMITOMO KACSnjC V03£3 (X 40,000,000) 1»U M3IAL IBDUSTS15S (X 60,000,000) LZli 3$ SUKITOJ - 17$ SUM I TCMO CO-CPISATIW EUCfilC ?C«B (X 20,000,1 KTUSltt AIBCKAJ1 MABUPACTUilltOtX 30,000,000) 3$ COMHffiTI CASK'S 12,000,000) 3$ menu aims MAtfujAcruajso {* IVDUSTRItS KSTAL IVJISTRlAL CO. {» 8,000-, 000) 3* SIWO u SUHlTUJtO LTD. CQ-CPIRATIV2 i IBO.OOO.OCO BLKCTHIC PO'.TS JE-iOL PLL'OHin KISIVO CO., LTD. (X 2,000,000) SUMITOMO SABX (X '3,675,000) 17%) BORTB C3ISA OOLD HISISO CO., LTD. (X 1,700,000) sumitomo alvmibum prcductiob (I 20,000,000) SUMITOMO TOI KlBIKu CD,, LTO. (X 2,500,000) SUMITOMO RlCHISKSr MORIS (X -10,000,000) MACHIi?K=T CUBLKOK MlilBO CO., LTD. (X 5,000,000) ei9,_ 3UMITOM0 UiSdCAL CO. (X 110,000,000) I MC5IS.L7D. U-, SAZAIIS KIH1B0 CO., LTD. (X 1,500,000)

SUMITOMO H.SCTRIC IMDU373IE3 (J 123,000,000) KCiLAi Z.\£±lX-S)Hfi2 RLACl-LIAD MJO. .CO. ,LTD. (X ; 81KIT0M0 CCHMUiilCATIOS ISDUSTal (X 150,000,000) tiSAUTUCH! JilSlJTO CO., L». (X 3,000,000) SUMITOMO MXTAL IHDUSTHI (J 418,750,000) TAlTO M1KIS5 CO., LTD. (5 1,030.000)

SUMITOMO KARSHOUSS (X 15,000,000) TUGI CCWJiSClAL '/J. , LTD. (X 200,000) SUMITOMO CO-OPMATm 1LKTKIC FOVXR (X 30,000,1 MAISUO MISIS4 CO.,. LTD. (I 10,CX»,CO0) /ii itcoava ismcfiaiT oj mcraic pqtzi co., ltd. (s i, 750,000) SUMITOMO TBU5T {* 20.000.COO) «j UltMSBU SBIFPI»0 CO,, LVD. (I 5.000,000) SOBISAil HIILDJBO tfOSiS, LTD. (X •) 6% SUMITOMO CO0PIBATI7X ULICTEIC K'Jt& {1 20,000,000) I &JM UOXHAJDO COLUAHI s^iCLtS CO., LTD. (I 160,000) OTARU COAl tBASSPOBTATIOH CO., LTD. (X •) HIItLDiA DUPPIBG CCST20L CO., LTD. (I ") 10$ SUMITOHa METAL IUT)'JSTR1E3 OP Mj.HCHliaiA [J 30,000,030) . L_r Ti^HiT-tn C0LLI13I CO., LTD. tX «) 1C$ 8IPP0H ASRIAI RLZCTRIC IHSTaVMETJ (X 10,000, COO) XHO H1HIM0 80, OCO, COO) 1£$ TOHOfU H3TAL IK)U5?£I2S (X 10,000,000) U 40$ X0B&A2I SCALE SHAPE BLACi L1AD MJG. (X 2,500,0'JO) 42$ SASKIHAMA ejt co., no. i* 1,600,0001 404 SUMITOMO TAXI ChJUICAL CO., LTD (3 12,000,000) 49* TAKAiLAVA P .S3 ¥0?J:S, LTL'. {i 1,000,0(10) 404 ^USTO P*13T CO., L'J). (X 3,750,000) 16* ARTV5C (I 200,000,000) LIGHT METAL . 66^ TCAVShIHA ,CHIST?.I VOaXS. LTD. (J COu.OOO) CO. {X 500,000) r 9PKCIAL 0LAS3 * G?IK*L IjSTRU-iJITS , LTD. 6?£ 13* SUMITOMO EEAL ESTA?* 4 LLDO. (X 41,500,000) 5£S 0SA1A I; -UOrOOBAPli V0J;K5, LTD. (X 103,000) 3* IA1BAI LIGHT Ml.TAL H0ULD1KG « «) 50$ HIPKfl CAa=:rS .SDUSTHI CO., ITT. (X 1?. 0-30, 000) 1* SUMITOMO KISIKQ (J 80,000.000) KCiTM CBISA MACSISEHX HfDUSTBIAL, IZZ. (» 12,000,000) 33). SAU-NS >XTAL IirDUSMISS (* 3,000,000) S3S HASSHU XB1BC Pill .... LTD. (I 500.000) 21* SUJUTGHO MACUIBEHY MOB S3 (X 40,001,000) - 16* yas-.u.'.a k^-cthi: i'j.Ci;i:resr vozis, lti»". (v ib, 000,000) -•" ' 21jt H21GVU MAC3I!. : TOOL MFC. (* 5,500,000) 59$ ORIiVTU .--=TRIAL CO. , LTC. (I •) 10$ CHOSZtf SUMITOMO LICST METAL (150,000,000) 25]( KATS-10 HKATT 1SDUSTRIIS. LTD. (¥ 1,500.000) 2$ AVIAMiQA HISISO II 6,000,000) TAIGAS oauvic ?RODi ; co., ltd. (x •) 33,( 3UMIMM0 STB7TL»TIC E.VJi:f (1 20,003,000) 10$ (X •) 8J TOHOEU MITU I'IDIBTHIM (¥ 10,000,000) NIPPCS STTLPKURi: 4 BIT2IC ACID CC3TTB0L CC. . LTD. 261 SUM! TCMO ALUMINUM KZPUGWOS It 20.000.000) 11<

—I 21 SUMITOMO C03PtiATIVS SUCTWC PCWSB (? 20,000,000) 3* SUMITOMO JISAL .STlTt BL20. « 41,500,000) ll lrausi-aixs or ma-Vcbuhla, ltd. u 30,000,000) r" 20j> SUMITOMO 3CEiri-> PLAKTATICa (f 2.500, 0-30) IOBXaS SUMITOMO STJUX MOMS, LTO. (I 6,030,000) 12* nUKOIU Q^KPKESKD CAS * 94 SGMITCHC Crj-)a r:!ICATlCH IliDUSTBJSS (I 150.000,000) ALUHIHUM SUMITOMO, LTD. (! 4,500,000) 11* ECIESCX PROMOTIOS (V 100,000,000) HaSCUU2IAM 14 SUMITOMO HISIBO (* 80,000,000) LIGHT MtFAL ALLOY I;ID. CO., LTD. (X 54,000,000) ip avamuba Minuo (« 6,000,000) 12$ TX1I0EI COMI'RESaD 0A3 (X •) 54 ASTUS3 Lion K-.TAL (X 200,000,000) HAKSURJAH STZXL TUI£ 1SDUSTHIAL CO., LTD. (X 2, 500,000) 9$ CEIT1UL SRIPPIbC (I 5,000,000) 2< SUMIT-CMO MKTAL (« 4l8,7tO,000) uIldt-SKljre MI2IKC CO., LTD. 6$ MATSUO K1BIX3 (X 10.000.OX) SAZAVi 6* CEOSES SUMITOMO LIGHT KJtTAL ' D3AXA KiTAL ISD'JSTaiES, LTD. (* 60, 000, COO) USHl;.A*A SPIffilK CO., LTD. (I 1,800,000) UaCHAlT MT3. CO., I.TO. (I 12,000,000) 20,000,000) n$ Sumitomo coopiPATiri nicTsic po«h (» | SOMA ??£CISi iaSTEUki-STS MJO. CO., LTD. (S 4,000,000) -'.' ::-, ictu'-rc, l-:, (j fi.oco.rooj TOHOKU Xi7tJi IHDUSTBIBS, LTD. (X 10,000,000) SUMITOMO KACEIIZBZ *0£I3 (X 40,000,000) C7SULA ISOU /OfliS LTD. (I •) SHOVA (IRS ROPS MFG. CO.. LTD. (X 2,000,000) TOTO CcHMOSICATIOS APfAiy.T'US CO.. LTD. (X 15,000,000) 3$ 16* ABTUIIG LIOHT KTHI (X 200. COO, 000) £BISU"fA MACHIHK TOOL HVO. CO,, LTD. (J S, 500,000) »u:;a« itv-c-.'sic ap?asatus CO., ltd. Cx 3,000,000) AJTRITS-' IL-. -.:r]C CO., LTD. (X 10,000,0-30) SUMITC^KO STSTSKIC kiSIB (X 20,000.000) KH'^iU A13CHU? UN. CO., LTD. « 30,000,000) OSASA DIAM0S11 UXUSTRI£S, LTD. {X 2,000.000) wiCAtios Apf-Aiurus co.. ltd. (x 6. 000,000) 3$ | 10* CHOSM S (Ml TCMO LIGHT KtTAL (X 60, COO, OCO) OSA-f.A . RTUS11U ASH8 KPO. CO.. LTD. (J 12,000,OOC') HSTAL imOSTRKS, LTD. (X 5,000,000) Klfi- . . . L'i)\ (X 2,503,000) 174 SUMITOMO ALUM1BUM PJOUCT10I (X 20^030,000) r-lAL ST*£L M>0. CO., LTD. (J 25,000,000) TOrj.1 ft J3Jij ISLj'JSTSISS, LTD. (X 5.000.000) SICI WW CO., LTD.iX 1&5.O30) SUMITOMO SFiCIAL STKJ. MW. CO., LTD. (I 20,000,000) XCTtA BUI33E IHDUSTRIE3, LTD. (X 3, COO, 000) Un . . I <5 CO., LTD, (X 12,000,000) TiUOIU CC3U=B256tQ GAS CO., LTD. (J •) E1ZAI TStMSI RUBBXH V0BXS, LTD. (I 45O.0CO) sipj - c ;iai s ikdvstries, ltd. (x 10,000,000) 0SAX.V MACHin TOOL IBDOSTRIAL CO., LTD. (( 1,000,000) MASERU SLSCT.UC M1RS CO.. LTD. (H 40, 300, OCO) HIPPvS AKiUAL SLKTRIC Il'STHUKBKT CO., LTD. (* 10,000,000; WW KETAX IKWSSIHAL CO., LTD. (K fl, 000 ,000) BC-riTH CHISA [ISCTRIC VIRS CO., LTD, (X 30,000,000) l»aUMK2AXl WIRE1SSS UCU1KX Kit. CO., LTD. (X 'WO, 000) : ':.;-. SIPPOB SUBMA.UM C.\BIJ: CO.. LTD. (I ELJO.r.IC IKDUSTHILS, LTD. (X i:j., LVD. (X 6,000,000) 12,000,000) HAJCHISS 2,000,000) r" i kit}. CO., LTD. ») SHOJk' ILZCT.^IC VIRB 4 CA2LS CO. , LID. (X 10.tO0.000) SLECTSIC iLAis LTD. (X 3,000,000) (I HXKPOtl CO., 74 SUMITOMO MIXIHO {X 80,000,000) ri!C IHCUSTMUS, LTD. {X ruji ;-' :21c Mifti co., ltd. (i 25,000,000) CfJiKi CO., LTD. (X 700,000) 4,CX>0,000) miOXU Z3% SUMITOMO WJOBO'JSJE (X 15,000,000) TGKTO TISS lOMISO WUFSS CHIBA E1ACTAIG IBDUSTRIM, LTD. {% 5,000,000) KATlOl^J. Iti'-NS* APPARATUS MPtJ. . CO. LTD. (I 400,000) CO.. LTD. (I 5.200,000) 7$ SUMITOMO BXAL tSTATX A ELDO. (X 41.500.000) I ISO CO,, LTD. (* CaOSSH SLKT3IC tflMt CO., LTD.. (X !, 000, OCO) HOPPO KAiVl i CO.. LTD. (X 1,000,000) 6,000,000) 404 sumitomo raasa (x 20,000.000) BIPfCU run* LTD. (X PIPH KfO, CO.. LTD. (» 14,400,000) 0B1SDI53 CO., 5,000,000) AHDOU KLSC I . , LTD. (1 '3fl SUMITOMO'ALUMI.'.'UM 2S5UCTI05 CO. (I M.VOO.OOQ) J [KDaSTM2S,LT0.{* 900,000) MIPFCa £L£CTiIC VIHS CO., LTD. 4,000,000) TAUXOSJil tLLEUfACrUBl^l D. (I 1,C U 3$ SUMITOMO MACK1I.TLST VOLTS (I 40.000,000) TAKAtJUU MISIKC ("i SKIOSO CiO»ICAL CO., LTO, (* 2,600,000) UTAJSTaiAL CO. (X o) — CO., LTD. 600,000) BICBIL'L'K 2$ SUKJTOHO XIJCTEIC IS1>S5TRIES (X 120,OiW,000) -i"--- o) CO. II ELBCTMC DISTBlBUTIMa CCSTSOL CO. . LTD. (I ") BHICI M30, 150,000) BIPP^! 6$ 3«IITO«0 RATAL IlIULsriLES (X 418.700,000) 100$ SJPPOS 3FKIAL STISL XLLZTiCPUllVQ CO., LTD. (V •) Bll-i^S Kiili M*liK CO,, LID. t# ^,uOO,COO) nilOICU COMhUSHCATlOli IKDU5T3IK3, LTD., (X 16.030,000) *$ JIPl'Oi sasrr gijss ii L2.25u,ooo) 60$ IOCHI MIKIKO CO., LTD. (( 260,000) TOiAl 1UCTHIC KIBX CO., LTD. (X 7£0,000) Ifpcs khjipwmt co., lto. [x 7,500,000) 3$ SUMITOMO CV-7X?J.TLYS TLZOISIC tX 20,000,000) 100$ HAjrVA SILICA MIVIlo CO., LTD. (J 150,000) TSUJU KLiCT.ilC VI 112 CO., LTD (X 750,000) Tiuraaw WIKI-GlLTI lUCUsTHIiS, LTD. (I TUIC ruKGSTOi ISDUSTEIIS. LTU. (S 1.600,000) AMAGJiSAjri its KjO, ,\ RllWfllBATIOH CO. LTO. (J 195,000) XTCTO 450,000) MlSKB IHDUSTaiBS, LTD. (X 1,000,000) WO. CO., LTO. (X 30,000,000) MIICITJ iLLOTrJC WIBS CO., LTD. SUM XLZCTJ-IC WIrtZ CO., LTD. (X •) IiAlICHI AU/jTIJ/G CO., LTD. (X 1,000.000) . HACUISSai kfOPJIS LID., {i ^, £00,000) •) TOtro patsoL kisin co., ltd. (x wo.ooo) TkHAUCHI M>ATJ7ACI'JfllMG CO., LTD. (It nuxrait t^ji cLim co., ltd (x 5,0-jO.OOO) OH SAiii. KOKDRZD A SJI IAAT , LTI. (I •) OAJ.IAMA PiulXCTUBI COKHLrtClAL H1RILXS9 CO.. LTD. (X •) UK lit paohOTira co., ltd (x lao.coo) tat 1 1ATT CO., LTD. (I 30,000,000) 33$ Mirt panx ur.- ., (r s.noo.ooo] -....; E KFO. CO. . LIU, [\ •) DOTS S0< SUMITOMO BAKU 0/ SSaTTLX (X •) WAiUTlMA TRACt CO., SI LTD. (I 10,000, OCO) tit SUMITOMO SIX! M CALIIOSKIA (I •) tEI^A jil.T s.3i. 1. C0WPAM3S LISTTD IX SOLD) B01ZS ABZ 53E5IDU3HS DIFJCT CONTROL CO., LTD. (( •) DTOn OJ TR2 PlKOT ... :/.'. •) 98$ UAJtiTSO IKE CO. ,1 . . [I HOLD I KG • COSTBOI 07 1 (I ') BDaSIDUSIl! OT 7Z3 PAB35T EC'LEIBO CCKPAH ' 68$ SAMSHU I.'. ..-U. CO. , i -. (I •) 3. coiiPAjas ;s :. votes, LTD. (1 •) Lism da^ ions am ctwr*ms u rsira rzr kjhitoko bobsha cm in srosiDiAsn'S 3j.t* iirrrsTM^TTs. ST CO., ITT'. (I •) Ml IIXXl hDTUAL AID PlMAMCIliO CO., LTD. (X J.aM.lKXi) '. HP 1 ^-70?i:XD CUPITlL, "*1*I iO CO., LTD. (I •) 10J$ WAUIiMA H1XU0US1 CC, LTD. (I ) 4. PBlCDnAaiS '... 3T0CI ^\C 3T A irMITOHO COi3SK3. CO., LTD. (X •) PSpatDTioHS IilSTBD [jionln'tasiif-! 1>A.M Hi Will •) 1 90$ SUMITOMO U (I Till i. UB AM0U5T OT SWCI EL2 DHBCTLT 3T T73 SUMITOMO . LTD. 1* ) TAMrtUS. 20$ CSiAA VOOLXK TUIIU CO., LTD. (X •) 8. onmis Piii!Co?tLiT ceo$s aoLDiaos amckj ' j-x>i:iii3i2s in »t» ' seow. '0,000) LOf TOA [V4UIt] : D. [| •] BOLUKU XiTAU CUT. A RAT. ca:vtiC'.,L7D. (I".0rO,0O0) * DATA UNAVAILABLE 0URCE 3 SUMITOMO HONSHA. FEBHUARY 46 NUMBER 50

— I — 1 !

liiE Geo tngton Uoi |

INDUSTRIAL HOLDINGS |_FAMI LIES n U L. U MN Vj ^

YASUDA INVESTMENTS HOZENSHA INVESTMENTS I _g_30,000Q00 i — - — r

I I I I i i I 110.0% lHJ.0% __[sej% 112.5% 114.71!. 130.0% Lia^y. % -J ,-,, . i— 1 J -_1 liL?* j—-—-,!— — .j- J_eLP% ,, — r TU3HU OH I 08070 '• » I, jAl'ill ii?u l| l| J4J-*S 11 TOA I l tauj« jjpas [ morale || 1 U1D01 Diqnii coci I Ufl&U I OZSUC&l FLW 1 Aia puaa TQ2L || I i uaasa | 1 lEJUSffaUL >'" I 1 I r I I

I I I1J.6OO.000 M.OOO.000 «60. 000.000 «0, 000.000 11.000,000 I ,25. 000, GOO ) JO.OCO.OOO II .000, COO j Bn.017,600 j J! JL-^S^jL,' I I INDUSTRIAL SUBSIDIARIES BANKING SUBSIDIARIES

r" T~" TTt~«% TiTolT"

T7! o%~ "~T

25 07, Ml TOIO ?IflTCH IBDWial OPTI11;. COKBtlStlCB -81 I 420,000,1X0 Sf. 000, COO

I

Ij HHOEJ j — "ir 1 C3IHICA1 1

132.6' X, [~~ 1UJUHOTA '.IlIOACi 49,000,000 1 1 I

, docxubd I I aau'-st :o;

! I I

la, sco, 000 I I aieo.cco mo.^o

I jlOO% I C ___L|8.0% JI6.S% ~4" " I TT3-S "^J BU3AU Oil AIWU1H O.4C1R10 790% 100% 100% 32.0% 44.0% II B.0% |30-^% [2.CJ) % ~! II I IBT9 auu I i lUKUOJl SOTOXU sismu JiiAH IGitfcl SAC-iltL'laK l| 1 nG.OOJ.OCO 000 ,000 050. 000 BBOZa r |J «, MO. rins BBOZSI EIKP PJu LUWJtfl ccaucuno 1 12,100,000 nss.oco £0,000 31,000,000 « WW, 000 T19O.0O0 31,000,000l,W.V,l,V\J JJ,1JL» |. „ :jl_:

[10.8% % 9 % /} % __i3.°— —jl j£ ii ^

I *UMU.» "If MM» r 10 »0A II raaiuai unouci trnTAw auuoi I || |

! 11 ! '• ! I es.ooo.ooo li «?, 800,000 I n.ocw.oop || rea.uoo.oco

"1

-4- "T" Hft.0% L J38.0 ")[ WJUM. ~]1 lUSHICHI "j

THTtlLB || cut/ Uro a4Tl«(JUI312i II J 11 mSEd, II *1 ,000,000 «co,ooo no - 4140,000 1 *90O,0O0 1 WO, 000,000 I f_JL ESTS SUBSIDIARIES, SUB-SUBSIDIARIES AND LEGEND INVESTMENTS OF THE YASUDA HOZENSHA

INDICATE DIRECT CONTROL ON DECEMBER 31 1945 INDICATE SIIAREHOLDINS WITHOUT CONTROL itUin INDICATE IN1KULOGKIN0 RELATION AMONO tU'iriL or 1 MAIN SUBSIDIARIES. JAPAN SOURCE. YASUDA HOZENSHA. FEBRUARY 46 OHO SOAP NUMBF.R SI

18

TABLE 2

ZAIBATSU FAMILY OWNISRSHIP PATTERNS (1946) {% of Stock Held)

c rip t ion Mitsui Mitsubishi i tomo

Parent company stock held by family 63.8 47.8 83.3 Subsidiary conpany stock held by faai.ly 69.0 40.5 37.8 (10) (11) (15) Semi-subsidla:'y company stock held by family and parent uompany 57.5 32.7 29.0 (12) (16) (6)

Botes: a. Figures are averages of companies in the same group.

b. Figures in parentheses indicate number of companies.

(Philadelphia: OrientTwest Publishers, 196*9), p. 3.

„ ,

19 force to link whole constellations of subsidiary firms to the parent organization. Typical of this traditional ideology, was the formal swearing of an oath of loyalty to the company which took tho following form:

Oath of the Southern Sakhalin Colliery & Railroad Company1

1. I shall never violate the orders of the president or the instructions of my senior officers. 2. I shall sincerely and assiduously perform my duties, never bringing loss to the company. 3. I shall never divulge to a third party any of the affairs of the company large or small trivial or important 4. I shall keenly bear in miud never to violate any of tho rules of the company. 5. W.\th respect to any business I transact, I shall always follow the instructions of my senior official, never undertaking any transactions on my own judgment,

Year. Month Day Permanent residence

Family relationship (i.e., relationship to head of the house. 1

lame

Date of b-.rth

Southern Sakhalin Colliery & Railrsad Company

Ha c j^ness Power, . As . 56. Miss Hadley indicates,,„,, Ji T* P it is interesting to note that the form is written in extremely formal, literary Japanese-. . . employing the honorific and humble forms. Thus, for example, . /.the wora company is . . prefix* th an honorific (the honorable company), the word ! I' by a humble qualifier."

"

20

However, not ones to leave the delicate control

mechanisms to tradition, families and honshas instituted other

management techniques to secure relationships. Some of the

major ones were:

1. Ssvere punishment of even the highest executives

for a show of independence or by otherwise incurring the

displeasure of the family.

2. Direct appointment by the honsha of the board of

directors, president, and/or officers of subsidiary companies.

In the event that, for instance, a president was selected, he

might be alio -red to name his own officers, but only with

approval of the honsha .

3. Tie formation of interlocking directorates whereby

directors or ranking members of the honsha served in various high operating or administrative positions in one or more of

the key subsidiaries (Table 3).

4. Requirements by the honsha that subsidiaries

submit the agenda of all board or director's meetings to it in

advance.

5. Periodic "management-report meetings at which

(major subsidiary) presidents and chief executives . . .

delivered reports on their activities to representatives (of)

the . • e family and the parent coiapany,

x Hyutaro Komiya, ed., Postwar Economic Growth in Japan , translated b> ert S, Oza.ki "(Berkeley: University of" California Press, 1966), p. 231.

21

TABLE 3

SUMMARY OF INTERLOCKS BETWEEN OFFICERS OF FIRST-LIKE SUBSIDIARIES AND OFFICERS OF THE TOP HOLDING COMPANY IN THE MITSUI, MITSUBISHI AND SUMITOMO COMBINES, 1945

Position in Subsidiary Presi- Chair- Director Auditor No. Interlocks dent man with holding comoa ay

Mitsui Mitsui Trading * 1 2 Mitsui Mining # 2 3 Mitsui Trust # 1 2 Mitsui Life Ins. # 1 2 Mitsui Agr. and Forestry it 1 Mitsui ship- building 1 2 Mitsui Precision ! Machinery- # 1 2 Mi tsui Ohem.Ind.. * 1 2 Mitsui Real Est* * 1 2 Ml +r.n1 OV><«^4«'» i T t*A lfWW«*<*. Wi4*^*^g ^ JL Mitsubishi Mitsubishi Heavy Indus try * 3 5 9 Mitsubishi Trading # 5 3 9 Mitsubishi Bank * 3 4 Mitsubishi Mining •; A 4 9 Mitsubishi Elec, * 7 2 10 Mitsubishi Chem.. Indus try # 3 3 7 Mitsubishi Oil 3 3 Mitsubishi SteeD. Fabricating # 5 1 7 Mitsubishi Trust * 3 2 6 Mitsubishi Ware- house 2 1 3 Mitsubishi Real Estate * 1 2

22

TABLE 3 CONTINUED

Position in Subsidiary Presi- Chair- Director Auditor No. Interlocks dent man with holding company

Sumitomo Sumitomo Mining a- # 2 2 6 Sumitomo Elec. Indus try # 2 3 6 Nippon Electric * # 1 2 5 Sumitomo Metal Indus try # •M- 1 2 5 Manchurian Sumitomo Metal Indus try 2. Sumitomo Mach. * 1 2 4 Sumitomo Chera. Industry * * 2 2 6 . Sumitomo Alum. Reduction * 3 1 5 Korea Sumitomo Light Metal 8, Sumitomo Bank # 3 1 5 •* 5nm1 +nmr> Tv» 1 1 o +• w - " i A z , — i - i riumx-Gomo i»iie Insurance # 3 1 5 Sumitomo Ware- house * 2 1 4 Japan Engineer- ing # * 2 2 6 Sumitomo Co-op Electric Power * 1 3 5

a Not listed on table.

Source: Kadley, Antitrust , p. 83.

23

6. Exclusive buying and selling arrangements,

7. Use of combine banks for intra combine financing.

By reviewing both short- terra and long-term applications for credit,, the combine bank and its affiliated financial institutions could also check on (or strengthen coordination and control of) subsidiary activities.^

The extent to which zalbatsu banks controlled lending can be seen in Table 4.

TABLE 4

LOA.IS MADE BY FOUR ZAIBATSU BANKS IM 1944 (in million yen)

Name of Bank Amount of Percentage of Money Lent All Loans Made

Mitsui Mitsubishi Sumitomo

Vo n nn o i t

Total of 4 baiiks 6,702 74.9

Total of all banks 8,943 100.0

Mote: Because of a policy to promote Dank mergers adopted in 1927, the four Zalbatsu banks by 1931 jointly had 38.2 percent of the total national deposits in their banks vis-a-vis 22,1 percent which thsy had held in 1926, just before the policy was initiated. This trend continued until the end of World War II. In this sense, the 1944 figurea (are overstated) ... as representative prewar figures.

Source :Kozo lamamura, Economi c Policy In Postwar Japan (Berkeley: University of California Press, 1967), p. 112..

llladley, Antitrust, p. 29

a

24

Zalbatsu Economic Pa tterns

In addition to the semantic difficulties engendered by the word "zalbatsu. " attempts to define the economic nature of zaibatsu business concentrations have led to much disagreement between experts. Mainly, this disagreement appears to have its origin in discerning whether or not the combines were competitive or noncompetitive between themselves, and, as an extension of this, if they were, in fact, monopolies.

Two factors evolved which served to cloud these issues even more: first were the various methods used to measure the effect the zaibatsu had on the economy; second was the propensity in Japanese literature and speech to refer to the zalbatsu in terms of dokuisen s hlnon (monopoly capital).

There are two main methods us fid to gauge the economic impact of the zaibatsu combines. The first is a percentage

measure of the paid-in capital ("the amount received • . • from 2 stockholders whether in cash, property or services") as derived by "totaling the paid-in capital of the subsidiaries within the various combine networks and dividing this by the total of paid-in capital for the nation."^ The net result Indicates the

strength in selected industries of each , zaibatsu combine in relation to each other and relative to an aggregate total for

^Seymour A. Broadbridge, Industrial Dualism in Japan

(Chicago j Aldine Publishing Company, 1966), p. 5S. 2 Di c tip nary off, Bus 1 ne s . p . 449.

^Hadley, Anti/frrust. p. 45.

25 the nation. However, a major problem with this analysis emerges when a decision must be reached on what subsidiaries constitute the individual combine and which source data to use to compute aggregate totals. An example of the latter problem appeared, for instance, in 1946 when "the Ministry of Commerce and Industry reported . . . ¥32 billion, the Ministry of Finance, ¥43 aillion, 1 and the Bank of Japan, ¥48 billion'* as the aggregate total paid-in capital of Japan. The sscond method of calculating economic Impact is to measure business concentrations based upon a percentage share of defined markets. However, problems similar to those experienced l:i the paid-in capital technique are also found here. Decisions must be made, again, as to what subsidiaries

are to _~~.-u.s-_. ,_, .,, be included^j.^vaww, in-»_* defining* W j. *«*a ^anv ^tix—•+i*,»i _ b iV ucuacu u<»-'i~uj..u.t3 , whether or not to select out only competing firms in the "capital- intensive" sector of the economy as opposed to the aggregate measure of all industries (large, medljua and small); and what (or how much) output constitutes the "market" for any single product or group of products? Since there is no standard industrial classification system such as is found In the United States, it can be said that

. . • Inadequacies in statements o:° Japanese total output are so great that the (concentration ratio; percentages are only roughly indicative, indeed, there are substantial differences between ne * 1 • l° set of) figures and others, similar but not directly comparable. d

^Ibld. f p. 46*

' Corwin D. Edwards, Dissolution of the Japanese Combines,n™.w< Jc LJ^Ml^Mi^lTB (September, 1946), P ,232.

" .

26

The problem resulting from the equation of the £aiba£su and dokusen shlhon was the connotation that the zaibatsu combines were automatically monopolies—a fact which will be Insofar shown to be not true in the economic sense, but true as the combines were involved with imperfect competition sectors, i.e., "monopolistic competition." In addition, it was correct terminology in the concepts of "Japanese Marxist 1 usage" from -fhich it was derived. Typical of the practical application of this concept was the statement in 1935 by

Mosaburo Suzu&i from his book NIpro n _1 okus en Sh iho n no, Ka lbo

(Anatomy of fie ..Jap an ese Monopolistic Capital) in which he

described zaibatsu groupings as "a form of monopolistic

konzern.

WVia+. 'is mnno-nnlv? "Even wit.hnv t. the inmfidiments

enumerated ab^ve, a precise definitlor is Illusive. Under

Common Law, monopoly is generally conceived to be "an abuse of

free commerce whereby one company or a group endeavors to get exclusive control over strategic sources of materials, means

.' 3 can of production, or distribution. . . The monopolist

dictate prices since he is the only ore producing in that particular industry or competition is insignificant in terms of

pricing. However, this is a generalized description and the

^Hadley, Antitrust, p. 319.

Quotation of Mosaburo extracted from lamamura, E conomic Policy, p . 1 11

^D j c t lo nary of Bus 1 ns ss , p. 404.

27 difficulty in transferring from a general frame of reference to a specific one has been summarized by United States District

Court Judge W. 0. Noyes, who said:

The phrase "control of the market" . . . means the control of the disposition of a given product in a given market. It involves, primarily, the suppression of competition and, as incidental thereto: (1) the control of production; (2) the regulation of prices.

It is not essential, however, to the control

of the market . . . that it should, be complete. Practical control is sufficient: and this does not imply an absolute elimination of competition. On the other hand, a mere restriction of competition does not give control of the market and is not

unlawful. • . . Just where the line is to be drawn between a lawful and unlawful restriction of competition is practical suppression—must depend largely upon the facts and circumstances of each case. 3-

In order to achieve an overview of business concentra- tions in Japan, two tables (3 and 6) are shown. Table 5« although subject to the limitations previously enumerated, clearly shows that by paid-in capital ratios, only. in the rarest cases did one zalbatsu combine control, a substantial percentage of the total, whereas it was much more common that the collective zaibatsu (all combines) did dominate. Table 6, showing market ratios, indicates that whereas one combine may have had a large percentage of one segment of a single market, other combines operated within the. framework of the same market.

1 Quotation extracted from Dictionary of Busi ness , p.

404 and is derived from W. 0. Noyes, Intercorporate Relations , pp. 352, 356.

THE ROLE OP THE ZAIBATSU IN JAPAN'S ECONOMY (1937-1941-1946) IN TERMS' OP PAID-UP CAPITAL TABLE 5-- Continued (Unit: 1,000 Yen)

c b Zaibatsu Financ ial Heavy Indus try Lighl Indus tr t Others ' i?4i. "1943" 1941 1946 I94T" ±'-;'--0 3Hz j J53Z_ , y 1937 1941 "1946" 298,190 884,109 214,166 Mitsui 70,500 70,500 | 169,375 84,802 158,389 273,693 159,125 104 , 190 403,891 127,000 127,000 159,875 262,475 630,870 866,032 66,050 Mitsubishi | 86,850 73,030 118,573 296,125 604,576 . » &n^.7on Sumitomo Rfl p^n 65, k0 5 469,460 lft inn) OO "TO o h -zczr\ ' 102,485 ', 209^411 500 58^750 119,413 116 Yasuda 140 898 143^256 8^ 21J862 34)487 '963 *83| 792 133|793 63,747 2,027,429 669,071 The 3ig Pour 396,6^8 399,006 604,086 739,615. 5, 209,264 297,826 493,003 483,090 628,433 1,174,699 % of National Total 22.5 25.2 49.7 14.6 18.0 32.4 7.0 7.5 j 10,7 6,1 5.7 12.9 834,044 558,061 1 Aikawa 1,250 2,750 4,650 332,965 1, 55,217 85,650 102,372 13,763 41,200 37,872 Asano 86,777 219,938 418,856 77,173 78,7187ft 71 « I 88,858Q.Q QrrO 51,871 78,410 184.858 479,308 76,195 Purukawa 1,250 3,750 65,732 2,212 1,400 3,180 4,243 Okura 500 500 6,050 45,038 82,200 217,707 33,567 35,729 34,250 27,365 42,625 55,524 • Nomura 15,150 20,150 25,650 4,850 50,250 25.-500 38,065 27,100 17,000 62,400 62,400 Naka,)lma e 188,280 23,610 788 The Other Six 2, 912,462 18,150 24,650 40,100 520,512 1,325,850 1?3, 669 239,562 279,870 109,999 224.635 237,012 of Kational Total 1.1 1.6 16.6 % 3.3 10.3 11.8 6.5 6.0 6.1 1.4 2.0 2.6 I The Ten 414,798 423,656 644,186 1,260,127 3,353,279 .581,533 402,933 537,383 772,873 593,089 853,073 1,411,711 of Kational Total 23.6 26.8 49.0 % 53.0 24.9 29.8 13.5 13.3 16.8 7.5 7.7 15.5 National Total 1,640,099 1,583,118 1,216,143 5,065,991 11,270,109 17,501,369 2,990,610 3,968,607; 4,587,862 7,957,816 111,013,147 9,074,142

Financial sector consists of ban! ing, trust, and insurance. °Hea7y industry sector consists of mining, metal manufacturing, machine tool, shipbuilding and chemical. c Light industry sector consists of paper, ceramics (including cement), textiles, agriculture, forestry, marine products, feed and miscellaneous. d0ther industries are electric pov or/gas, land transportation, marine transporta-

tion, real estate/construction/warehousin^: , commerce and trade. ft Fl?ures for Nakajima not availabl e for the years 1937 and 1941. c Source: Rearranaed from data in fi •i'llsv. Antitrust tin. 48-S >.

3

29

TABLE 6

POSITION OF THE TOP FIRM, TOP THREE FIRMS AND TOP FIVE FIRMS IN SELECTED MARKETS, 1937, 194-9

Indus try 122L__ 1212.

Top 1 Top 3 ^op 5 Top 1 Top 3 Top 5

Coal 15 35 44 16 35 43 Crude Oil 67 91 95 94 97 99 Electric Power (1936) 10 21 27 78 84 89 Pig Iron 83 97 n.l. 65 89 91 Steel 41 56 66 32 58 68 Aluminum 52 91 (100) 57 100 (100) Electrolytic Cojper 37 74 98 34 70 92 Elec. Wire & Cat les n.lc n.l. n.l. 21 51 66 Elec. Engines (1943) 36 72 91 23 52 61 Shipbuilding 35 67 86 ] •'.' 38 56 Locomotives 28 71 95 21 54 78 R. R. Passenger Cars 40 77 94 31 56 74 R. R. Freight Cars 38 71 91 22 56 76 Automobiles (1933) 59 100 (100) 45 98 (100! Bearings 47 100 (100) 38 66 79 Elec. Light Bulbs n.l. n.l. n.l. 27 47 54 r\ Re»wi r\rr OK CO r? Mar»hin9S *• ^ * i *•* . .». • I C£iUSXi.C oOua vj.;?4uj £cL 55 72 ID 3b 56 Ammonium Sulpha t 22 60 78 15 39 57 Calcium Superpho sphate 24 46 59 30 47 61 Lime Nitrate 40 86 94 31 75 91 ! Synthetic Dyestu ffs (1939) 28 56 61 37 74 88 Celluloid 59 77 85 43 68 78 Photographic Fil n (1940) 72 100 (100) 72 100 (ioo; Auto Tires/Tubes (1939) 41 100 (100) 33 89 100 Plate Glass 73 100 (100) 65 (100) (ioo; Cement 23 40 54 22 52 70 Pulp (1941) 49 65 76 21 43 57 Western Paper 71 83 90 27 62 74 Cotton Spinning 15 33 42 14 38 57 Rayon Yarn 13 36 53 25 66 94 Cotton Goods 7 16 22 7 20 31 Flour Milling 34 71 n.l. 20 40 44 Beer 63 99 (100) 38 100 (100) Butter (1943) 80 90 92 67 85 89 Soy Oil 12 20 24 10 18 21 Condensed Milk 42 80 86 35 79 86 Shipping 14 29 37 9 20 26 Warehousing 16 37 46 13 30 Banking 11 25 39 8 22 35 Life Insuran q e 16 ':• 25 45 i e 100$ of product ion has been attained before ize grouping in question, 100$ appears in parenthe: bv Ezce ptions to the 193 7 data appear in parentheses Source: Hadley, Antitru st, pp. 322-323.

30

With the premise that, under a strict definition of

terms, the individual zaibatsu combines could not be called monopolies, then, under the workings of imperfect competition where there are few producers who control the majority of any

single product market, they would be known as oligopolies.

However, ther3 is one unusual aspect; the zalba t.su combines

through their subsidiaries appear time after time competing in multiple markets. Table 7 illustrates this phenomenon by

indicating leiding combines in selected markets during 1943 and

194-4. In this respect, the Japanese practice does not follow

the standard Western conception that different oligopolists

exist, as a rule, in different markets (i.e., one manufacturer will only compete as an oligopolist In one market, not in

mn.nv) .

This now leads to the question concerning competition

between zaibatsu combines. Detailed research done in this area

by Eleanor M. Hadley shows that the ccmbines, in fact, were

competitive but enjoyed a cordial type of oligopolistic

relationship in that they developed a "live and let live"

business philosophy toward each other, This quid pro ouo

existence was based upon a rationale that it was not worth the

price of gaining a piece of one market by cutthroat competitive

tactics while losing in another market where they faced the

same competitor who had control. Indicative of this balanc.

^Hadloy, Antitrust , pp. 14-19.

31

TABLE 7

MARKET CONCENTRATION RATIOS BY COMBINE BY SUBSIDIARY, 1943-1944

Pic^Iron National Policy Co. pon Seitetsu Japan Iron Mfg. 79;^ As a no Nihon Kokan Japan Steel Pipe 14 Okura Okura Seiko Okura Steel Mfg. 2 Mitsui Amagasaki Seit. Amagasaki Iron Mfg. 2

Ingo t National Policy Co. Nippon Seitetsu Japan Iron Mfg. 53.5$ Asano Nihon Kokan Japan Steel Pipe 15.4 Kawasaki Kawasaki Jukogyo Kawasaki Heavy Ind. 4.6 Mitsui Araag. Seitetsu Amagasaki Iron Mfg. 2.4 Special Steel National Policy Co. Nippon Seitetsu Japan Iron Mfg. Sumitomo 9; Sum.Kinzoku Kogyo Sumitomo Metal Ind. 8 Kawasaki Kawasaki Juko^yo Kawasaki Heavy Ind. ' S Mitsubishi Mitsubishi Seiko Mitsub. Steel Mfg. Asano 2 Nihon Kokan Japan Steel Pipe 2 Aluminum Purukawa Nihon Keikinzoku Jauan Lieht Metals "S'S.O^ Mori OK A«n T-.-1 . T.. -. Sumitomo Sumitomo Kagaku Sumitomo Chemical 13.9 Mitsubishi Nihon Aruminumu Japan Aluminum 10.2 Coal Mitsui Mitsui Kozan f Hok, Mi t. Minings Hokkaido Tanko & Others Colliery & Others 35.0$ Mitsubishi Mitsubishi Kozan Mitsubishi Mining and Others and Others 15«0 Nis san-»Mangyo Nihon Kogyo Japan Mining Ube Mining Sumitomo 6.0 Purukawa 4.5 Okura 2.8 Asano 2.4 Iwaki Tanko Iwaki Colliery 2.0 Ammonium Sulphate Nitchitiu Nitchitsu Hiryo Japan Nitrog.Pert, Mori 22^ Showa Denko Showa Eclect.Ind. 21 Sumitomo Sumitomo Kagaku Sumitomo Chem. 14 Mitsui Toyo Koatsu Oriental High Pressure Nissan-Mangyo 13 Nissan Kagaku Nissan Chemical 10

32 TABLE 7 — Continued

Calcium Cyanamide Mitsui Denki Kagaku Kogyo Elec.Cbem'l Ind. 53^ Mori Showa Denko Showa Elec. Ind. 14 Nitchitsu Chochitsu Hiryo Korea Nit. Pert. 9 Soda Ash Mitsubishi Mitsubishi Kasei Mitsub Chem.Mft. 52/^ Iwai Tokuyama Soda Tokuyama Soda 28

Dyes tuffs Mitsui Mitsui Kagaku Mitsui Chemical 53$ Sumitomo Sumitomo Kagaku Sumitomo Chem, 8 Mitsubishi Mis sub. Kasei Mitsub. Chem.Mfg. 7 Shipbuilding Mitsubishi Mitsub. Jukogyo Mitsub. Heavy Ind.22?S Kawasaki Kawasaki Jukogyo Kawas. Heavy Ind. 18 Nissan-Mangyo Hitachi Zosensho Hitachi Shipbldg. 9 Mitsui Mitsui Zosen Mitsui Shipbldg, 5 Sibusawa Ishikawajima Ishikawajima Jukogyo Heavy Industry 2

Source: Condensed from Hadley, Business Power , pp. 373-379.

33 situation were the inter-combine programs of investment in certain private and national policy companies (Chart V).

Without cordial relationships, such mutual investments could not have existed.

— ; . ; 34

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CHAPTER III

ZAIBATSU EVOLUTION AND DEVELOPMENT

Introduction

The b;isio purpose of the following short historical review of the political-economic develDpment of Japan is to provide an insight into the base upon which the zalbatsu rested, to examine the strength and dominance of the family as a concept of business organization, and to show the relation- ship between the government and the za ibatsu as Japan emerged as a world power.

To remain within a chronological framework- the chapter has boen divided into ma^or periods in Japanese history as follows: the Tokugawa Era (1600-1868); the Meiji

Era (1868-191:?); the Liberal Era (1914-1931); and the

Militaristic J2ra (1932-1945), Each of these periods sets the stage for the next and the last one provided the building blocks upon which the attitudes expressed during the Allied occupation were based.

Histor ical P e rspective — The Tokugawa Era ^1^00-1868)

The Tokugawa period in Japan was an era of transition from a feudal political, social and economic structure to the paradox of a capitalistic economy contained in the continuum

35

.

36 of the feudal social and political framework. The Tokugawa overlords established and maintained a strong centralized government and held strict controls over feudal lords. As a result, the country enjoyed a long period of peace, but the steady growth of expenditures by both the central authorities and the daimyo (local lords) pressed hard on the samurai

(warriors) who were the ruling elite class (shlzoku) of the rigid social hierarchy. The nomin (peasant class) were also subjected to pressure. As a money economy gradually replaced the existing exchange economy, which had been based on rice, and the daimyo took a larger and larger percentage of rice which had to be converted to cash on tsrms which had become increasingly Less advantageous, the peasants began to move ir>to the urban areaa to look for work. Along with them came the samurai whose economic wants had increased while their real income had decreased. Thus, with incrsased urbanization, the

growing indebtedness of the samurai , daimyo and s ho guns (war lords) and the appearance of commercial and private credit instruments, the wealth of Japan gradually passed into the

hands of the c -honln (merchant class )

It was this change in the economic structure, and the social and intellectual ferment among the samurai as well as

Western pressure to end Japan's isolation, that provided the impetus in the mid-nineteenth century for the overthrow of the shogunate and it was during this era that the inception of the

oldest zalbaftgu r Mitsui and Sumitomo, occurred.

37 Mitsui

About 1620, Mitsui Hachirobei, who had renounced his samurai status, entered the s akl {rice wine), loan and pawn shop businesses in Matsuzaki, Ise Province. With capital accumulated from these sources, he and his son Saburobi opened a dry goods store in Edo which quickly became successful.

r In l& 3 t the fourth and youngest son, Mitsui Taketoshi, moved to Kyoto where he established a textile firm. Having great business acumen, Taketoshi then opened a branch in the textile wholesale center of Osaka and another branch in the retail center of Edo.

To expand the base of his businesses, Taketoshi then sought admittance to the money exchange guild. After nearly ten years ojl waiting, m xocv * ne was admitted and xQUHd&xatel^v opened a money lending and exchange business in Edo. Since usury was the legal and the quickest method of accumulating capital during the Tokugawa shogunate, the business prospered and Taketoshi expanded again by opening branch exchanges in

Kyoto (1636) c.nd. Osaka (1691) as well as establishing a silJc

Jpjryja (wholesale house) in Osaka. The tonya took on a special significance in that it became

. * . an Instrument through which production was controlled, by c rcial capital^ both by providing capital (to others for high interest returns) and. by putting out (a system where

advances were made of raw materials and • vice capital) raw materials. It was through this

iKame of Tokyo prior to 1868.

^ ,

38

controlling position that the tonya organiza- tions were able to limit production and set monopolistic prices on the goods they handled. 1

In 1691, Taketoshl, along with another Mitsui and ten other individuals, came under official Bakufu (Tokugawa bureaucracy) protection to handle transfers of official funds via bills of exchange. The privileges of participation in thin business were great as it increased the status of the house and provided entry into the feudal political structure as well as providing physical protection to the Mitsui house.

From these auspicious beginnings by Mitsui Taketoshl, came the Housa of Mitsui. By bringing his sons into the business, the house became an association of related families rather than a single entity.

By 17:22, the Mitsui family had developed a written law of the house which took root in the samurai concepts. Tne law, which was writeen in the form of a will by Taketoshi, was all encompassing, as can be seen from the following synopsis:

Under this code, the personal as well as the business lives of the Mitsui (family) members were subjected to regulation by a family council, dominated by the head of the main family. Marriage, divorce, adoption, and other personal matters were so controlled, no less than the handling of corporate

investment, savings, and profit distribution., «, . .

It . . . had provisions (for) apprenticing male house

members . . , (and the) « . . careful selection (of)

• « « outnlde executives.

^•Charles Do Shelton, The Rise of, the s^in

Tokugawa Japan 1600-1868 (Locust Valley, N. Y\ : . J us tin,

Inc., 1958), p. i 2 Bisson, Zaibatsu Dissolution , pp. 9-10,

i :

39

The house rules as written by Taketoshi, lasted for 178 years until, in 1900, they were revised with the assistance of

Western legal experts, but still served to tightly control the framework within which the eleven Mitsui families operated*

In the middle of the eighteenth century, similar control concepts took shape within the Mitsui traditional pattern of

Japanese paternalistic management whereby the lives of employees (over 1,000 men and women bj then) were regulated in minute detail. The extent of paternalism practiced during this

period was iniicated by Oland D. Russel s who, in his book The

Hous e of Mitsai. said

(The house) permitted a certain amount of profit

sharing a:nong the higher classes cf employees , and strict rules governing rest period s, health, sanitation and hygiene for all others. Dormitories

-.-. r« 4- * 4-"U -v% •$ 4-^. -^ »«• *-. • +%.<£> . .. %T£NY» a £\ nvi^ ^ w tvr\ 1 , •&.!* **. «. »*. — "I ^. — „ -. ,., were carefully looked after, Thej were coached in proper sp?ech and required to be neat and clean in attire.

In return for the honor, security and other advantages secured through employment by the House, the feudal loyalty demanded and received by Mitsui from -their employees was based on real life terms and can be illustrated in this example of a Mitsui banjo (chief clerk);

Iiie banto was sent on . . . (a) difficult mission to explain an "unfortunate incident" to a daimyo who, if displeased with the explanation, could have forced the House of Mitsui "out of existence." He took a dagger with him. "If his testimony should fail to satisfy the lord, he was

^Quotation from Russel's, The Houg e of Ml ts ui . was iu extracted from Shelton, Rise of _the, Mer chant Olass . p. 65.

40

to disembowel himself en the spot and offer his life as a price for exoneration of his master 6, 6 The a 1.; P P ers tha * this clerk Jl^S?took with him on this occasion are preserved and to urV'f'^ bear testimony to the spirit with which he was serving his master."! Chart VI shows the structure of the Mitsui House during the Tokugawa years as it emerged into the Meiji Restoration.

Sumitomo

Although not as well documented by Western authors as Mitsui, the Sumitomo house also had deep roots in the Tokugawa period but attained prominence in a different fashion. The founder of the house, Masatomo (1585-1552), like Mitsui Hachirobel, had renounced his samurai status and established a bookstore and ironware business. By what was to turn out to

be a cleverly arranged 1 marriage, Masatomo s son-in-law happened to be the son of a Kyoto copper merchant who had learned from Europeans at Birado, the secret of extracting gold and silver from copper ore. By marriage the secret became a monopoly of the Sumitomo family who toned it into a fortune. The success of the new metallurgical technique earned a bonanza for the house, in 1691.

The Bakufu, who controlled all mines and minting operations, conferred upon it permission to operate mines, a

5 uota tion ettr^+^^r'v ?; ?°. Q marks indicate where Shelter- d ™r ° a information from an article, Lifef f ^ "Chonin's Under Feudalism, » by 24itsui Takaharu which appearedaPPea,red in the June 1940 edition of Cultural Nippon

,

41

0) 0) « oi en 01 c c C o D _c u u JC 1 X 1 X !•' X o S UJ UJ J "C 13 1X9 >. :-. >» ii 0» 0) c c c O o 2 2

< UJ (

>» 1 c ti G. ._ D E u a cj o U a on i Dl o jjj c X ^6 2 n a "5.1: :i z ai

1i 5 ,n »-._.«. -— —.—., {-— "-~~>—

- r 1 1 u a> u [ k. o c ' o w <«> *» a> i! to to t/j El o !

N I .- o 5 • O jj '•:• :- 2 ; . t_ u UJ t/1 "5

(V 0> I 1 u i o u t— i - x [ C !

III 1 XUJ I--

T * ; "— 0) f.. u £ f . ': .! » Li U ' v> o u > ..''. "u o >. O o •*m*S "\.- c a r> o 1 1 i D K :; 01 L_ -u •-. • ••» 1 X X ' iS I o \

. )

41

privilege granted to only the most prominent business famili-

By sending agents to scour the country for copper, gold and

silver deposits, Sumitomo was successful in the discovery of rich ore locations. He was also successful in the effective operation of the mines.

Historical Perspective— The Mei.U Era (1868-1Q1P

The Meiji Era, following the Restoration of 1868, can be described as the time in which the economic growth of today had its foundation. It was character is 3d by internal changi in social stratification, the development of the zaibatsu as recognized socio-economic organs, and Japan's emergence as a world power.

Due to the threat of domination by the Western powers A after the middle of the nineteenth century, private discontent materialized into the fusing of a popular determination to restore the emperor and repel the barbarians. This was brou, to fruition when, in November 186?, young samurai leaders of Satsuma, Chosu, Tosa and Hizen Provinces, with their peasant troops, defeated the feudal army of the sho^un.

lThe appearance of the Russian, , British, American and French uuring the early nineteenth century, who dominated trade' and cna A lenged the policy of so Lon by a superiority of arms, forced new pressure on the already strained To In sho; a. The arrival of America val units in 1853 under Commodore Matthew Perry, who demanded facilities for trade, forced the government to acquiesce and short] astern ers obtained treats lich provided for ex ten;, commercia: concessions and which g: bed extraterritorial status, thus exe] ;.g them 1 Ji Qese jur.: tion. Ultimate'? concessions virtually gave an • Lng monopoly to fori elements

42

The Emperor Meiji was officially restored to power on

January 3, 1868, and in April of that year, issued a fiat for reform. The leaders of the Restoration ruled as a bureaucratic

oligarchy in the name of the Emperor a.id immediately set out to

build a modern state by inauguration o;! social, political and

economic measures. The real purpose behind these moves was not

to democratize' Japan, but rather to be able to cope with the

Western powers by means of a united people, strong industry and an equally strong military.

The old four major class social systems were formally abolished. With the exception of the imperial family and a

nobility which had become enlarged to include certain samurai, merchants or wealthy peasants who had contributed to the new

establishment, all people were classified equal^r as commoners,

Tn e daiiiyos became salaried governors of prefectures and, in

general, the samurai who had been indennif led with government

bonds as restitution for their loss of income and status,

entered the professions, military services, business or the

bureaucracy. However, as the ruling cl.ass, the samurai had

formerly enjoyed a monopoly on education as well as managerial

experience and they quickly took advan-^ge of this to establish

themselves in the top echelons of their new occupations.

^Top were samurai ( shlzoku ) ; se:cond were peasants '"'( (noni_n) j third vcere a'r t is ans ko p;e inin ) ; and last were the merchants (chonln). All had strict hierarchies within each group.

43

The chief impetus for industrialization came from the

government which was convinced that modernization of the

economy and technical advances were essential to survival.

They first sel about adopting every aspect of Western

scientific discovery which pertained to a military industrial

base. To achieve this goal, Meijl leaders sought to induce

private capital into new Industrial endeavors, but were

generally unsuccessful due to:

1. TV. e weakness of private capital. 2. Tie Initial technical and organizational difficulties machine production entailed. 3. The conservatism of private owners of wealth. 2

In the twelve year period from 1868 until 1880, the

government participated heavily in the establishment of an

J +- 1 r> r'i n o +T* 1 al V\Qro "Ktr Annf i oao+^ rvvi o v%A A r±t' rsl r\ v\rrt ^ v* *t«f av^«-H w^ arsenals, shipyards, mines and foundries which had belongc^d to

"the shogunate and daimyos . Prom this foundation they then

expanded, with assistance gained by inserting foreign

technicians and instructors, into the strategic industries such

as chemicals, glass, cement, transportation (railroad and ship

building), and communications (telegraph and telephone).

Jointly with private investment, Keiji rulers became financially

^-Mitsui, Sumitomo and the recently established House of Mitsubishi were notable exceptions to this policy of new investment..

^Thomas C. Smith, Political Change and Industrial ' De ve lOBmen t l)i ...Japan: Governme nt Enter pr iser lffSo^lBBd " "[Stanford t Calif . : Stanford University Press, 1955), p. .36,

44

involved with supporting the textile industry. The rationale

behind this latter move was based upon the fact that textiles

were exported and a primary means of gaining money to pay for

foreign equipment and technicians. The authorities wished to

reduce to the barest minimum imports of any textile commodities except capital goods and raw materials, With government

backing, the mechanization of silk production was fostered in

order to increase the quantity and quality of the product since it was in the highest demand by Western countries. At the same time, model textile mills for spinning and weaving were Introduced and the government offered long-term loans to

importers of textile machinery so as to promote the entire industry.

In the late 1880 's, the Meiji government began to sell most of the enterprises under its jurisdiction to private

interests only holding back the railways, arsenals, ordnance works, the naval shipyard at lokosuka, the telegraph system and certain mines. Three major views have been proposed as to why the government sold the industries: first, they were sold to a few wealtay families for the purpose of forging an alliance between the government and the small, but wealthy capitalists; second, it was a political technique to mollify opposition; third, it was necessary to save the gover] from financial 1 collapse. In v.iy event, the sales resulted in the transfer, to select groups within the private sector, of fully

x Ibid .. p. 87.

45

equipped plants with modern machinery as well as technicians

and a trained labor force. Since there were no domestic competitors and relatively few competitors in the entire Par

East, the initial impetus thus generated by these acquisitions was never lost.

Due to the financial and political structure of the Meiji government, only particular private interests were

selected to purchase the national industries. The principal problem which Paced the early industrialization program was to mobilize enoug.i capital to finance it. Although the majority of large merchants and money lenders at Osaka and Kyoto (who, by then controlled 9 80 percent of the i Ion's wealth) had joined in overthrowing the shogunate. they were conservative in nature and hesitated to risk huge amounts of capital with no assurance of profit and no protection against loss. As a result, the government initiated a series of forced loans c .!:<' their capacity as exchange agents for the Meijl finance office, the 24itsui house, who had already made a contribution to the new treasury, was assigned it responsibility for the collection of these loans. Soon thereafter, it was decided to spread the responsibilities for land tax collection, storage and expenditure between three houses—Mitsui, Ono and Shimada— which gave then distinct adv ges in that they could temporarily enjoy the use of- the fur.: „- were in -; possession of the house. In addition, this grou, ' to

46 perform exchequer services for some seventy -five local govern-

1 ment units ' which served to increase their span of Involvement and control. However, in 1874, after the government suddenly demanded a radically increased amount of security funds for the public monies held by the three houses, Ono and Shimada became bankrupt leaving Mitsui the entire exchequer business until the establishment of the Ilppon Glnko (Bank of Japan) in 1882.

During this time, the informal representation of big business in politics began with a political friendship beween the Mitsui house and Inouye Kaoru in the early I8?0 s s. Inouye was a high official in the finance off-.ce in 1871-1872, the

Minister of Industry in 1878, and Foreign Minister in 1879.

He continued to hold high government offices throughout his lift! as well as serving as advisor to the Mitsui interests. Because of the aid it rendered and political connections it had, the

House of Mitsui was permitted to buy at a low price (often below actual cost) rich sulfur, lead, silver and copper deposits, the huge Mi ike coal mine and textile mills.

Others besides Mitsui received privileges. In 1870,

Iwasaki Yataro began a shipbuilding and shipping business, and in I875, founded the great Mitsubishi enpire. To expand trade,

the Meijl government gave him thirteen ships that had been used

to transport troops in the punitive expedition to Formosa in

1874 and, in addition, until 1885, provided a yearly cash subsidy of just under £250,000. In I885, Iwasaki formed the

Hadley, 3u sines s Po w

47

Nippon Yusen Kaisha — NYIC (Japanese Mail Steamship Company) and

the government subsidy was increased to about ¥880,000 per year.

In addition, to strengthen the firm, it was made, by legislative

action, the sole military carrier for the government.

As a reward for expanding Japan's trade as well as

benefiting from political connections, Iwasaki Yataro and his brother, Yanosuke, were permitted to purchase the Nagasaki

shipyards, the Tasashlma coal mine, ths Sado gold mine and the

Ikuno silver &.n<5. copper mine from the government.

Other industrial units were soLd to Sumitomo and

additional houses until the government had divested itself of

the majority of its interests.

With the emergence of Japan as a world power as a result

of victories in both the first Sinc=Japanese War of 1894-95 and

the Russo-Japanese War of 1904-05* strategic industries grew in

scale and in capital invested. Simultaneously, the great

zalbatsu houses expanded in size, increased the number of their

enterprises ard consolidated their holdings thereby taking the

shape of the modern combines. The controlling families,

closely connected to the government bureaucracy from the early

•'It is interesting to note that the first recorded joint venture by the zaibajtsu houses occurred in this period when, in 1906, the South Manchurian Railway Company, which represented government, Mitsui and Mitsubishi interests, was established and succeeded to rights formerly held by la. The C( ny, becoming a center of the Japanese domination of Manchuria, also controlled the valuable Fushun Coal Mines as well as the Anshan Iron Works.

)

48 days of the Restoration, were, as Industrialists, becoming a new power in the political sector of the country. At the same time, the military was moving into a public position of power and prestige a3 were the political parties. Through a gradual process, both groups began supplanting the aging and weakening

Melji oligarchy in the role of national leadership.

Two major political parties dominated the Imperial Die1 for the first four decades of the twentieth century. The

S£^ukai (Association of Political Friends), which had origins in the 1870* s, was conservative in nature deriving its strength from rural areas. However, by support from the Mitsui zi tsu, it also developed a strong urban wing. On the other hand, the

Minseito (Democratic Associates Party) was also conservative but predominately urban and intellectual in natui It was supported by the Iwasaki families of tie Mitsubishi z a lb at

Historical Perspec tive—The Libera l Era (1914-1931

The nearly two decades of liberalism in Japan spawned an even greater hold on the economy by the zai^atsu. The

World War I boom was characterized by the term naxiJdJa (new rich) which came into common use. With the expansion of the economy (which was, in part, due to the acquisition of

Germany's assets in the ?ar East and in part to economic

concessions in China), shlnka zalhatsu (new zalbatsu )

—

49 developed 1 and the older houses became wealthier and stronger.

By 1916, Japan had become the world's greatest producer of raw silk as well as cotton cloth, and was a major producer of chemicals, dyes and pharmaceuticals.

But the wartime prosperity ended in the depression of

1920 and subsequent industrial recovery was irregular. The silk and textile industries prospered ci.uickly, becoming again the largest segment of Japanese manufacturing. Meanwhile, heavy industry did not revive. Under ^he combined forces of disarmament negotiations, the devastating earthquake of 1923, and the world iepression of 1929, it stayed sharply contracted with a low lev'3l of activity until the mid-1930' s. However, the diff icultles of the period affected the zalbatsu houses least* Using the wealth previously accumulated- they invested heavily in horizontal and vertical integration by buying out competitors and purchasing sources of raw material production all at depressed prices. Thus, at a time of general depression, tne zalbatsu actually expanded and Japan, despite fluctuations in foreign markets, simultaneously expanded its trade and built one of the largest merchant fleets in the world.

As ana, Ayukawa, Furukawa, Naka.jima, Normura and Okura. Some conflict, which is mainly based on dates of origin, is present in the determination of the actual companies characterized by the term "new za lbatsu . " One school of thouj calls combines which developed during and immediately subseqv to the World War I boom "new 2iLlksJ£i\" J "the other school maintains that these companies developed during the period of the 1930 's as a result of the quasi-war economy of that decade. (See Table 1).

50

In addition to the above, zaibatsu houses also

increased their political power through the mechanism of a duallstic industrial economy. One side o.f this dual structure contained the relatively few zaibatsu who could be

characterized by huge enterprises with thousands of personr

the other side was composed of thousands of medium and small manufacturing units which mainly used manual production methods. Tab.'.e 8 shows this pattern over a period of years from 1920c

TABLE 8

JAPANESE INDUSTRIAL DUALISM 1920, 1930, 1939

-fr --} Size of Unit : 1239 *-... ..mo , ^ 1-5 OO '7

5-29 8.5 9.9 23.5

30-199 5.6 6.5 19.2

200+ 31*5 JLLSL -;>h-0 Total 100.0^ 100. 0# 100. 0^

Sources: 1920 —and 1930—Hadley, Business Power , p. 301. 1939 -George 0. Allen, Japan H; Economic Expansion . p. 271.

Many of the smaller enterprises depended on the

zaibatsu combines for credit, orders or marketing channels

(i.e., for their very existence). This dependency relationship

increased the scope of zaibatsu political influence by broadening the power base to incorporate all elements of the

.

51

stratified society. Not only did the zalbatsu houses materially

assist in financially backing the people it wanted to place in high positions through the two political parties. Family 1 relatives were similarly advanced since industrialists were

now very acceptable in court circles and intermarriage with the aristocracy and bureaucracy was common.

In the financial sector, banks had developed into the

chief source of both long- term and short-term working funds for industry and commerce. Although government banks remained

dominant as an effective and signifies. at instrument of military

and expansionist policies* private bancs such as the Daiiehi (First), Xasuda, Sumitomo, Mitsui and Mitsubishi concentrated

on increasing their capital. Over the years they absorbed

smaller banks which had gotten into difficulties in a series

o f £ i na nc ial cr is e s

The termination of the Liberal Era came suddenly when,

in September 1931, the Japanese Army, after extensive economic

penetration by the government Bank of Ohosen (Korea), staged an

explosion on the South Manchuria n Railway near Mukden and

blamed it on Chinese sabotage. The "Manchurian Incident," as it was popularly called, gave the Army the excuse it needed to

1 Prime Minister Kato Takaaki (1925-26) was the son-in- law of Iwaski lataro, the founder of tl I Ltsubishi hour;.-, fascinating k study has been made of tta and current political- economic anal | relationships by ) a Chitoshi in hi ok, ln Js ; l M (Sew Haven: Yale Unii Lty Press, 1968;.

,

52

occupy the country immediately and therefore, before the liben government could act, it was presented with a fait acconmli.

By December 1931, the "Manchurian Incident" had caused the Minseito Cabinet to fall and, sines Japanese military

forces occupied all important population centers, in February

1932, the puppet state of Manchuko was established as a

protectorate; a location from which the Army continued its

policy of economic and military infiltration into Mongolia and North China.

As was previous ly noted, the zaibatsu had aligned

themselves with the two major conservative political parties, the S^jukai and the Minseito . A synopsis of their effect on

the political stri be se< i am the following;

In the period 193.5-1932, two conservative party lineages were recognized and utilised by the 2£ibatsu as means to power, that is, to influence the formulation of public policies. The parties became dependent on them financially, and this influence was used to obtain national policies favorable to big business and specific company interests, to resist agrarian and military elements when they threatened z-aiba/tsu positions, and to oppose any broad reforms which might change the socio-economic structure. 1 However, this arrangement was relatively short-lived. In 1925 the Universal Manhood Suffrage Bill gave rise to expressions of unrest by the farmers and indus -trial workers which manifested

Allan B. Cole, . . / 'IM^^^iY^a^^Politics, Boston University Studies in Pol] No. 1 (Boston, Mass.: The Graduate School of Bos tor; University, 1956), pp. 74-75.

1

53

Itself in the organization of active proletarian political parties. Thin, in addition to smear tactics used by the militarists and ultra-nationalists, led to extreme pressure on

"the zaipatsu in the form of condemnation for all political corruption (a great deal of which they were actually responsible for)* Since the zaibatou were somewhat aligned (if not actually, then mentally) with liberal Western influences for purposes of tiade while still having great power in the government, it was relatively easy for the right wing to twist

the coin and c iscredit both capitalism and all democratic/ liberal goverrment. As has been succinctly stated:

Here vsas sort of guilt by association, applied perhaps more to institutions than to individuals.

Greedy capitalists , corrupt politicians, and an economically menacing but effete Western world were lumped together in an amorphous but horrible totality, in which each helped to discredit the others and which contrasted sharply with the supposed native purity and selfless loyalty of the military and the nationalistic f ana tic.

Smear campaigns, however, had their limitations and a series of assassinations in 1932 by ultranationalistic groups with the targets being leading political, bureaucratic, business figuras as well as moderate Army and Navy leaders, proved effective. Premier Inukai Ki (isyuoshl), head of the

Seiyukai. was murdered on May 15 (the "5-15 incident") in a plot engineered by twenty-five young Army cadets and Naval officers. Also among the top people assassinated at this time

•^Edwin 0. Reischauer, Japan Past a nd Present (j>rd ed.;

Newr York:: Alfred A. Knoff, 1934)7* p. l?oT"

54 were a former Minselto finance Minister and Baron Dan Takuma,

chairman of the Mitsui hons ha . Prom this point until the Army- took complete control in 194-1, Cabinets were run by a conglomeration of civil and. military boreaucrats who attempted, without success, to steer a course between the aggressive expanoionistio policies of the militarists and the tenents of relative cauti.on promulgated by major zaib atsu.

The trend was definitely to war i more and more military control with only the efforts of a relative few of the Emperor's advisers and a power struggle between two factions of the Army, the Toseiha (Control Group) and the Ko|oha (Imperial Faction)., delaying the inevitable. It is interesting to note that the split in the Army did not involve war Dr peace, but only the direction in which the war would move; the outcome of which would proroundiy affect xne future of Japan. The Kodoha held that the Soviet Union was the primary ?nemy of Japan and was to be attacked as soon as possible, whereas the Toseiha favored avoiding the Soviets and pushing southward into China. In

1936, passions overrode judgment and in February (the "2-26 incident"), young officers, supported by soldiers of the Tokyo garrison and some of the Imperial Guard, seized key buildings in Tokyo and sent assassination squads to eliminate the opposition. Jn this blood-bath, Finance Minister Takahashl

Korekiyo, Keeper of the Privy Seal Admiral Saito Makoto, and the Inspector of Military Training and Education, General

Watanabe Jo tar were among the many killed. Although the government suppressed the rebellion, the incident set the stage

55 for leaders of the Toselh a to assume authoritarian control and direct war efforts toward China (fighting actually began near

Peking on July 7» 1937). Their position was formally solidified on May 17, 1936, when it was required that the

Ministers of War, Army and the Wavy be selected from active officers in the armed forces.

Almost immediately subsequent to the violence in 1932, the zaibatsu began to abandon the political parties and seek an accommodation with military and right wing bureaucratic leaders. In existence at that time were over an estimated 500

patriotic and nationalistic societies t among which were the anti-communist Kokjjhonsha (National Foundations Society), the

Sakurakai (Society of the Cherry) and Kokurvukal (Society of the Amur River—more commonly known as the Black Dragon

Society) . Although some of them had limited membership (e.g.,- the Sakurakal was limited to Army officers of the rank of lieutenant colonel and below), zaibatsu interests were able to shift their affiliation from one group to another and, if desired, belong to several societies at one time. This switch of allegiance from political parties to the more right wing authoritarian type of government was not such a radical change

in that s while

. • . . the zaibatsu had stood bshiad the parties,

. . . they had also stood behind a strong centralized government and rigid police control of the people. They were no more committed to parliamenl government than to autocracy. Burliness meant far more to them than political principles. The vast

new field for economic explol I n provided by thi militarists in Manchuria became, to a large extent,

^

56

the special domain of a newly risen group of zalbatsu . but the wars and rearmament programs of the militarists led to rapid development of heavy industry and of certain other specialized war Indus tries to the benefit of all the big industrialists. The average zalbatsu executive remained afraid of the risks and expense of a major war, but he was not averse to cooperating with the militarists in minor colonial ventures and in the profits of building an empire. The militarists for their part, while initially suspicious or openly hostile toward big business

and capitalism in general, discovered early . . . that the j could not fully exploit the empire they were conquering or develop the war industries they needed without the full and willing cooperation of big business.

Table 9 indicates the extent of the operations of selected combines in occupied territories and serves to bear out the cross connection between the zalbatsu and the military as far as mutual interests were concerned.

The mastery of the political «rts shown by the zalb' became apparent when, in the early 1930 ! s, Mitsui 's foremost executive, Ik 3 da Seihin, became Governor of the Bank of Japan and later Finance Minister. He used his Influence in these positions, almost exclusively to gain funding for the expansion of heavy industry. In addition, other zalbatsu members received top positions in the Ministry of the Imperial Household, the

House of Peers and the Privy Council. Another high political post, that of Minister of Commerce and Industry, was frequently filled by a zalbatsu executive or an appointee of the zalbatsu.

Conversely, retired admirals, generals and career bureaucrats

1 Ibid., p. 180.

57

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58

found high positions in the zaibatsu thus completing the circle of power and influence.

The period then from 1930-37 showed tremendous expansion of the Japanese industrial and trading base. The volume of exports increased 89 percent between 1929 and 1937, while imports increased by only 30 percent. Although dependent upon her Imports, (mere than 50 percent of exports required raw materials which were imported), Japan oecame the world's fourth largest exporter and had the third largest merchant marine. 1 Table 10 shows the 1935-38 increase/decrease of Industrial production in terms of a 1931-33 base of 100. Decreases in the textiles and cement/glass industries which took place between 1937 and 1938, have been attributed to conversion of plants to

.„..„ ^awuuu wi^i* ^.j nexj. «» uio changeover 01 equipment for

the pur-pose of manufacturing machine tools. In 1937, the government withdrew its previously indulgent policy toward industry and attempted to subject it to control and regulation in order to increase production of war material and channel essential supplies into the war effort. This prompted a six -year straggle (1937-43) between the zaibatsu and the military. Thus, while cooperating with the government on one hand, the MiM-tlE managed to wage a relatively successful campaign against complete nationalization of industries and los of their economic and management control. On March 24, 1938,

u. S. Army, U._S ,. Army Ar ea Handbook for Japan (2nd ed.; Washington, D. 0.: U. S. Government PrinUnTb ice, 1964), p. 735.

;

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f-'-)

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.

60

a National General Mobilization Bill was enacted which empowered

the government to "regulate production, distribution, prices,

wages, exports, and imports; to pay subsidies; to build 1 stockpiles; and to control capital issues." This bill also gave the government authority to mobilize manpower and impose censorship on public communications channels during emergency periods. In addition, some industries were nationalized and a substantial group of "national policy" companies established.

Table 11 details the nationalized and national policy companies. The latter were, for the most part, owned Jointly by the govern-

ment and private investment although supposedly governed by relevant ministries. However, "they wore hybrid agencies, In which much ^batsu capital was invested and managerial personnel was drawn from the combines rather than from the bureaucracv " 2

Their advantages lay in the fact that they were exempt from taxes for a period of years; able to obtain credit at low rates;, given special subsidies; the investors were guaranteed a minimum dividend (usually at least 4 percent); and were of: granted priority to obtain capital equipment and raw materials. As was indicat-d in Chapter II, combines Joined together to economically exploit the rich resources through the median' of the national policy companies. Since the proclamations of

1 Ikid . , p . 656 2 Bisson, Zalb .'^Mssojjition, p. 13.

61

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63 the "New Order In East Asia" and the "Greater East Asia Co-

Prosperity Sphere" contained provisions for making (under

Japanese economic and political control) the fiupire self- sufficient, it thereby provided for a wider and firmer economic base in industrial and trading power. Therefore, the zalbatsu. while not concurring with some of the :aethodology employed by the militarists, were in accord with tie general policy and eager to see military expansion centime.

As in conservative politics, z ilbatsu combines split military interests. Mitsui became closely associated with Army

Interests while Mitsubishi became tied to the Navy and Merchant

Marine. Shlnfra zalbatsu were mainly aligned with the Army.

In that military budget or expenditure;? (Table 12} represented

SUoh 8 h'c-h nfTrvrilAcft of v^p t.j nnal inr»:>m© cur- tnf.fil «•}•« t.A expenditures as appropriate, and the services, rather than the

home domestic market, were the prime customers of the zalbatsu . alignment with a particular service did no harm. This was especially true due to the immensely b:?oad base from which the combines operated.

During July and August of 1940, all political elements were "invited" to dissolve and in October 1940, the Taisei.

Yokusan Kal (Imperial Rule Assistance Association) was established ae a single mass organization with the role of uniting the people to the government and its policies. The

zalbatsu hastened to join this new group and, in faci y pome

64

TABLE 12

JAPANESE MILITARY" EXPENDITURES, 1930-1941

Military Expeticlltures .as %.o£ Total State. Exp end Itur e

Fiscal Year Army Navy Tc ta 1

1930 13.09 15.41 28.50

1931 12.89 15.54 28.43

1932 15.40 15.38 30.78

1933 19.16 16.04 35.20

1934 20.52 18.18 38.70

;,o',r 20, 43 2] .5] n -

Military Expenditures as % of National Income

1936 6.80

1937 22.00

1938 29.40

1939 24.70 1940 22.80

194.1 44.40

Source: Rearranged from data in Hadley, Busine ss Power , pp. 325-326.

. : *

65 family members and executives became leaders of the movement.

Since the zalbatsu had now become fully committed to expansionist policies, they intensified previous Intelligence activities on behalf of the government in the non-military areas (e.g., political, economic and psychological).

S. A* Francaise Bussan (Mitsui Trading's

French correspondent) . . . issued a daily report entitled 'Information de Paris" which ranged from

one to twenty pages. The . . . person writing this report read all the great French dailies and also certain Italian papers in preparation. Magazines including scientific 3 ou:£na l s were also systematically reviewed for it. While the . . .

(report) «. . . mentioned whatever military data appeared in the press and journals or came the company's way, the bulk of the report dealt with such subjects as industrial capacity, inventions, labor (particularly strikes) and political developments. 2

However, intelligence activities were not confined to Europe.

The following ei vrcr^ extracted from correspondence originated by the San Francisco branch of Mitsubishi Trading:

Date: 7 August 1939 To: The Seattle Branch Office

In view of the fact that the Development Department,, Tokyo, recently requested us to send

as much reports on subjects of interest . • . , it is our mutual desire to make these reports originating in your office, as well as this office,

as complete*, as possible. . . . I therefore propose the following arrangement for the future in regard

to reports on aircraft industry . . . .

1 Later, in May 1942, the Tais ei Yokusan Sgiii^Kai (Imperial Rule Assistance Political AssociationT was formed as a complimentary organization, to operate specifically in the political areas in behalf of the war effort. As was the case in the parent organization, zalbatsu members became leading figures in this movement.

2Hadley, Business Power, p. 252

.

66

(a) lour office shall report on material gathered from your local newspapers and what you hear locally in your territory only. (b) This office shall report from our local

news materials . . . , the "Wall Street Journal (Pacific Coast Edition)" and also on materials from national newspapers and magazines.-**

Date: 7 Juris 1941 To: Manager, Fuel Department, Huad Office, Tokyo Sub,J: Conpetitive Bulk Oil Shipment from Los Angeles Harbor

One striking thing noticed in the list (of oil shipments) aside from purely our business standpoint is the fact that a largo amount of fuel and diesel fuel oils and gasoline ;,n a minor degree are being shipped from (the) California Coast to

Pearl Harbor, T. H. . . . There must have been shipment of similar materials going out of San Francisco Bay and possibly from Es - ;ero Bay to Pearl Harbor during the same period. 2

By 1941, industry had expended enormously.

The production of machine tools totaled over 46,000, more than double that of l c '37» and at the enn of the vear Japan hac! a niachin? tool inventory of 689,163 units —a stock which was 65 percent of the United States' inventory. The motor vehicle industry was producing 48,000 units a year, and the aircraft industry was turning out ever 5*000 air- planes, 5

In addition, over 462,700 tons of new ship construction were launched that year. + Zaibatsu concerns were heavily committed to this effort, as can be seen from Chart VII which details, in terms of paid-in capital, the positions of the combines relative

1 Ibld . < pp. 348-349. 2 Ibid ., p. 348. J U. S. Army, Area Ha ndbook , p. 657

Jerome B. Cohen, Japan's Eco nomy in War and Reconstruction (Minneapolis: University of Minnesota Press, 19497, pT 251.

Chart VI!

Market Control by the Zatbafsu in Terms of Paid-up Capita!

Heavy Light Fin iciaS Industry Industry

37 41 [-. 37 41 46 37 41 46 " ; Hi ' 5 _;; Hi 1 '- \

; \. 1 ! Askawa

l .1 Asano Furukawa

Ol>kura jima nura

''"• ': ; A

a

1

I- 1

1 i

Sumitomo

Mitsubishi

:::z

•'

Mitsui

L :

^arranged by author from daJa in YhAley, Ai ust, pp. 48 -54.

68 to each other and to the economy as a whole during the years

1937, 1941 and 1946. A detailed study 'of the percentages involved shows; the striking growth of zaibatsu power during the war years and in particular, the major combines ("Big Four").

Whereas during; the period 1937-1941, growth of all zaibatsu groups was roughly equal, the Pacific War brought prodigious advances to the older and more powerful zaibatsu. These figures then serve to complete the connection between the older combines and J ;he military, proving that, despite differences in adoption of a means to the end, the conbines, on the basis of increasing economic power and profits, did support the extra- territorial designs of the military.

The aforementioned six year struggle between the military and the zaibatsu for internal economic power came to a head in 1943 when the zaibatsu staged what amounted to a sit- down strike.

If the Army-Navy Airforce General Headquarters were to irsist on retain administrative control

over an expanded aircraft production progr; .. involving complete mobilization of the industrial

giants of the Japanese economy, the- . . . Tz§JU imply not interested. They became willing to play ball when the administrative

authority was vested in a , . . Ministry (which would bo) controlled by their men a.nd operated

within the framework of . . . (legislation) to which they subscribed,

The results of these tactics came to fruition on November 1,

1943 t when the Munitions Ministry (staffed by zaibatsu

^•Thomas A, Bisson, "Increase of Zaibati u Predominance in Wartime Japan," Jou rnal of Pacific Affairs (March' * i 1945), * i i ii p ii i i i i i i n mi w iqwiiKWinn i>imw i— him | iii» w i h mm T * m m m p. 59,

69 executives) was created and, in early 1944, a Munitions Company

Act was passed containing carefully drawn provisions which secured the necessary centralization of administrative control, while at the same time, maintained the essentials of private control of management functions.

With the commencement of massive incendiary and saturation bombing in November 1944, the zaibatsu. contrary to previous patterns, attempted to obtain nationalization of industries to defray expenses incurred in repair/reconstruction and to control rising unrest among ind is trial workers. With few exceptions, the government would not support this policy, but did establish compensation payment plans for war damage.

Dissention amcng the workers was held In check by the passage, early in 1945, of a National Labor Mobilization Law.

The successive military losses along with the heavy bombing which culminated in the atomic bombs dropped on

Hiroshima and Nagasaki laid the "New Order in East Asia" to ruin and, "in the end, the zaibatsu were the victims of the system they helped to create."

^Quotation by William W. Lockwood from his book. The Economic Developme nt of Jap an, as extracted from Cole,

Japa nese Society and Politics , p. 77.

CHAPTER IV

THE OCCUPATION ERA (1945-1952)

Introduction

In the. seven years of Allied occupation, the most radical changes to the then existing Japanese social, political and economic £ tructures occurred. With a view toward, under- standing these changes as a basis upon which the current

Japanese political-economic philosophy rests, the chapter will closely examine the attitudes and events leading to the

dissolution oi . the zalbatjsu. purges of top business executives,

in American policy toward Japan, and the short-range effects of occupation reforms as they affected large business groups. Background

When General of the Army Douglas MacArthur, Supreme

Commander for the Allied Powers (SCAP), landed at Japan's Atsugl

Airfield on August 30, 1945, he found a nation whose economy was completely shattered and whose major cities had been devas -bated by bombing. By July of 1945,

. . . the economic basis of Japanese resistani

had been destroyed. . . . .Electric power and coal consumption were exactly 50 percent of the peak

reached in 1944 ; . t . overall industrial output was approximately 40 percent of the 1944 peak; (and) serviceable merchant tonnage was a little over 12 percent of the fleet with which Japan had begun the

70

71

war. Output of airframes had fallen 56 percent from the 1944 peak; aircraft engines 73 percent; merchant shipbuilding 81 percent; army ordnance

44 percent; and Naval ordnance 57 percent. . . . Oil refining had declined to 15 percent of the 1943 output (and) . „ . aluminum production was 1 only 9 percent of the 1944 peak.

However; the reductions in industrial cutput were not primarily caused by bomb destruction, but rather by a lack of raw materials created by an effective American blockade of Japan.

The Japanese dependency on imported rav materials was succinctly

expressed by tie Japanese themselves wi en, in 1943 » the Greater

East As is Ministry admitted that "should there ever come a time when supplies of raw materials are cut off, we cannot but predict that tie continuation of this uodern war will become almost impossible." Again, in 1945, 3n analyzing the effects

ox ux"uct..i axe a Dumoxxig uu \ uu@; oapaut: se war c ecc a committee from Tokyo Imperial University stated;

Before the first heavy strategical air raid

started, tie . . . (industrial) production of Japan had already been thrown into a desperate condition by the effective ocean blockade by the

Allied forces. . . . According to the data of the economic mobilization plan which can be regarded as an index -number to the economic strength of our country, Japan was forced to the verge of collapse in the third quarter of 1944.

1 Cohen, Japan's Economy, pp. 1C 8-109 2 Ibid . p. 110. ,

5 Ibid., p. 58.

72

However, the real effect of the bombing was felt elsewhere in Japan.

Nowhere was the urban air attack than inore effective itc impact upon the civilian sector economy of the . . m the 66 towns attacked, mately approxi- 50 percent of the housing favilities were destroyed, in all, 2,502,000 dwelling unitsS e 3 by air attak wiile anadd?!ioSal 614,0006?4 000 were ? torn down by the Japanese themselves ... to clear firebreaks. . . . Thus . . . 7 22 lon Japanese or thT~wnthe civilianJfJ ^}} 30 percent of population were routed out oV their established homes. 1

Although what remained of Japan's manufacturing capability immediately subsequent to the termination of hostilities was outmoded or worn down, Allied authorities estimated that: 2

a. Heavy production machinery was 73 percent usable.

U S auxc. c. Pracision production machinery was 88 percent usable. d. Automobile production equipment "did not sustain major damage from air raids." e. Railroad rolling stock production equipment

(1) Locomotives was 72 percent usable (2) Passenger and electric cars was 70 percent usable (3) Freight cars was 82 percent usable. f. Communications production capability was 10 percent, g. Wire and cable production capability was oO percent,, h. Electrical equipment production capability was 55-65 percent.

1 *kM»* PP. 353, 406-408.

S AP . v 2 > gBSa&ittoLja^-MansMUltary Activities in Japan

73

Occupa ti on JSoonom lo Policies

The initial policies upon which SCAP actions were based started in an outpouring of bitterness toward Japan and tho ensuing confusion of the surrender finally manifested itself in a primary desire to disarm Japan, completely destroy any potential for war still existing, and to exact reparations in repayment for Japanese aggression. In a radio address,

President Harry S. Truman said, "The evil done by the Japanese warloards can never be repaired or forgotten. But their power to destroy and kill has been taken froz them.' As an extension of these thoughts, initial occupation policy was designed to

. « «, insure that Japan will not again become a menace to the United States or to the peace and

security of the world. . . . The existing economic basis of Japanese military strength must be destroyed

t>( ' and not 6 to revive = .. To this

It shall ba the policy of the Supreme Commander . . . to favor a program for the dissolution of the large industrial and banking combinations which have exercised control of a great part of Japan's trade and industry.

The poLicies of Japan have brought down upon the people greit economic destruction and confronted them with the prospect of economic difficulty and suffering. The plight of Japan is the direct outcome of its own behavior, and the Allies will not undertake the burden of .repairing the damage. 2

-'•Harry S. Truman, "Radio Address Coincident with Surrender Ceremonies, September 1, 194-5," as published in the U* S. Department of State, Occupation o f Japan (Publication 2671, Par JSastorn Series 17', Washington, D. C: Government Printing Office, 1946), p. 6.5.

2U. S. Department of State, War and Navy, United Stg .Initial Post-Surrender Polic y for Japan as publishedTIn the U. S„ Department of State, Occupat ion of Japan, pp t 78-79.

: ~ .

74

On November 1, 1945, the Joint Chiefs of Staff gave direction to SOAP as follows:

It is the intent of the United States Govern- ment to encourage and show favor to: a. Policies which permit a wide distribution of income and of ownership of the means of production and trade. b. The development of organizations in labor. Industry, and agriculture organized on a democratic basis. Accordingly, you will: 1. Require the Japanese to establish a public agency responsible for reorganizing Japanc business in accordance with the military and economic objectives of your government. You will require this agency to submit, for approval by you* plans for dissolving large Japanese industrial and banking combines or other large concentrations of private business control.^

You will not assume any responsibility for the economic rehabilitation of Japan or the >igthen-

ing of the Jap; i economy. You will make it clear to the Japanese people that you me no

- ob.V 1 - tio~i to maintain an'" ^art-' "'^ c*^ living j.n Japan.

The A], lies chose to primarily reduce Japan's war-making potential by exacting reparations. To this end, President

Truman appointed Edwin W. Pauley as his representative on reparations. On March 1, 1946, the Pauley Report, among other

th ings , ur g e d tha 1

The Allied Powers should take no action to assist Japan in maintaining a standard of living higher than that of neighboring Asiatic countries

injured by Japanese aggression. . , . Under this principle, a broad view should be taken of the economy, and especially of the varying degree of

r i >'•-::/ > ' ''y(^y,is.<-: y",v , ..g —V ; published ±33 BiSSOn, Zalbatsu .Dissolution, p , 240 2 JQS.Statf Directive 1380/15. as published in Cohen, Japan's JE cbnomy. p."^17~l~

75

industrialization of Eastern Asia as a whole. The overall aim should be to raise and to even up the level of industrialization. This alia can be served by considered allocation, to different

countries j, of industrial equipment exacted from

Japan as reparations . Reconstruction is an urgent need of all the countries against which Japan committed aggression. Reconstruction is also needed in Japan. In the overall comparison of needs, Japan should have the last priority.

(The) ral batsu . « . are the greatest v;ar potential of Japan. It was they w.io made possible

all Japan's conquests and aggressiDns. . . . Unless the Z3.iba.tsu are broken up, the Japanese have little prospect of ever being able to govern themselves as free men. As long as the zalbatsu survive, Japan will be their Japan, 1

As a result of the initial hard-line policy, Japanese industrial recovery during the first years of the occupation was slow, with production, by 1947 » only 40 percent of a 1930-

1934 base^ which was only slight],y higher than it was when the war endea.

Zalbats u Dissolutio n

With regard to the zail

. . . there was no difference of opinion among the Allies about the desirability of economic deconcentratlon in Japan. Differences concerned only what should replace Japan's system of private collectivism. The United States wanted free private competitive enterprise, and under the circumstances, this policy prevailed. Host

broadly put, . . . (this) called for removal of ^ Q zalbatsu families from their position of business r and severing the tles-»ownership, personnel, credit, contracts—which bound the

Edwin w. Pauley, Tt on Japanese, Reparatio ns to the Preside nt of the Un ited StatesTuT s7 Department of State Publication 3174, "Far Eastern Series 25* Washington, D. G.: Government Printing Office, 1946), pp. 6-7, 39-40, 2 U.S. Army, Are fc, p. 659. Although later abandoned, the Allies had agreed that the average 3 trial production for the years 1930-1934 should be used as a base for determining Japanese peacetime requirements.

76

component corporations into combine structures. Proposed, but essential!.}'- abandoned, was an effort to split up certain of the giant operating companies of the combines.

The aim of the Allied . . . program was to give all Japanese businessmen the opportunity to engage in the modern sector of the economy, that is, to remove those conditions which in fact made it a private collectivism. The aim was to broaden the basis of ownership in the modern sector from a handful of business families of giant fortunes to

ownership by the many. . . . (The goals) were conceived not in idealism but because political democracy in Japan was regarded as essential to the security Interests of the Allies, and because political democracy and economic dsmocracy were viewed as inextricably related. 1

Combine deconcentration took tiree major f orms i first, the broadening of the ownership base by severing current owner- ship ties via confiscation of stock, dissolution and/or reor- ganization of specific companies; second, the severing of personnel ties; and third, the passage of major legislation witi regard to monopoly and deconcentration.. Immediate action was initiated by SOAP when, on October 22, 1945, SOAP IN 177*" directed that fifteen designated zaiba- ;su holding companies, within forty-five day's, submit data on their complete financial and asset structure as well as on that of their subsidiaries.

Shortly thereafter (October 31, 1943 ), SOAPIN 215 stated that

"no sale, trade, or other transfer or adjustment of the capital stocks, bonds, debentures, voting trust or other forms of capital securities' could be made without prior approval of

Hadley, Antitrust, pp. 10-11, 19.

^SOAPIN is an acronym for "SOAP Instruction."

•^Iwao Hoshii, Japan f s Business Concentration (Orient/ West, Publishers, 196977 p. 4.

77

SOAP by the fifteen designated zalbatsu holding companies. The directive went on to. say that the same restriction applied to

"any corporation, partnership or stock company" in which they

"hold any stock or other evidences of ownership, indebtedness or control, or directly exercise any power of management or direction." 1

In the meantime, Japanese Finance Minister Shibusawa

Keizo had beer involved with the four major zalbatsu (Mitsui,

Sumitomo , Yasuda and Mitsubishi) with regard to dissolution.

Of the voluntary plans recommended, the one by Yasuda was acceptable and, on November 4, 1945, it was submitted by

Sibusawa to SCAP. Two days later, SCAPIN 244 approved the plan with some modifications. Under the Japanese proposal (known as the Yasuda Plan), the Mitsui Honsha, Yasuda Honzensha,

Sumitomo Honsha and the Kabushlki Kalsha Mitsubishi Honsha were to transfer "all securities owned by them and ail other evidences of ownership or control of any interest in any firm, corporation or other enterprise" to a Holding Company

Liquidation Commission (HCLG), which was to be established.

The HCLG was to rapidly liquidate all assets by sale of securities to the public with preference of purchase being given

to company employees. However, the quantity of shares purchased

•'•Blsson, Zalbatsu Dissolution, p. 81. o Ibid . . p. 241. Bisson presents the complete text of the "Yasuda Plan' and SCAPIN 244 as Appendix 2,

78 by any individual would be limited and neither the holding company itself nor any members of the controlling families would be able to make any purchases. Upon completion of the liquida- tion, the former owners were to receiva the amount tendured in interest bearing (later agreed upon to be 3 percent) govc lt bonds, with a maturity of not less than ten years and which were "non-negotiable, non-transf erable except by inheritance, and ineligible for use as 1 collateral." in addition, family members would resign immediately from any business positions held and immediately subsequent to the transfer of ownership to the HCLC, the directors and auditors would also" resign all

offices held by them in the holding con.pany.

To the above, SOAP added the following major provisions: 1. The government was to immediately freeze the controlling familii 2. The government was to submit "plans for the dissolution (of other) industrial, commercial, financial and agricultural combines.' 1 3. The government was to present its program for enacting laws as will eliminate and prevent private monopoly and restraint of trade, undesir- able inter. Lng directorates, undesirable corporate inter- security ownership and assure the segregation of banking from commerce, " "« industry and agriculture. . . .

On December 8, 1945, SCAP issued two more primary directives. The first, SCAPM 403, specifically listed 18 holding companies and 336 subsidiaries and affiliates in a "Schedule of Restricted Concerns" which banned security

1 Ibid .. p. 242. 2 Ibid . . p 6 244,

79 transactions on their part. From this total of 354 companies, the Schedule was modified several times so that a new total of

1203 holding companies, subsidiaries and affiliates were eventually 11b ted, A complimentary order, SCAPIN 403, directed that the assets of "restricted companies" be controlled so as to prevent dissipation.

Since all SOAP directives had to be applied through the mechanism of Japanese law and enforced by the Japanese themselves, several legal instruments came into being to facilitate dissolution actions. The first of these was entitled an "Ordinance Concerning Restrictions on the

Dissolution of Companies" (Ordinance No. 657 » November 20,

1945) which backed up SCAPIN 403 and 408 and froze the assets of all "restricted firms" and prohibitad the reorganization of companies that were dissolved. On April 20, 1946, Imperial

Ordinance 233 * established the HCLC and, to facilitate disposal of securities, a lav* (No. 8) was enacted on January 17, 1947 which established a Securities Coordinating Liquidation

Committee (SOLO).

The HCLC designated 83 firms as holding companies and split them into two major groups, a dissolution group and a reorganization group, primarily based upon the type of holding company (pure or mixed). By the end of 1947, 16 companies were completely dissolved and went out of existence; 26 were dissolved after forming into successor companies; 11 were not dissolved but formed successor companies; and 30 remained intact after eliminating their holding company characteristics,,

(Table 13)

80

TABLE 13

HCLC ACTIONS ON DESIGNATED "COMPANIES

Group I—'Compa nies dissolved 42 Second compenies not established Second companies established

Group II— Co m ranles not dissolved 41 Second companies not established Second companies established

Total 83

Source: JBisscn, Zaibat.su Dissolution, p. 113.

During; the course of events the HCLC received a total value of 7,53--, 655,875 yen in stocks and bonds of the 83 holding companies previously mentioned and the 56 designated

" zal ha tau persons."

TABLE 14 HCLC SECURITIES DISPOSAL

Shares Bonds

,,; ' U: : (Paid-up Value) (Pace Value) TotaJ Zaibatsu families 448,393,784 8,555,092 456,948,876 83 Holding Companies 7,074,706,9^ Total 7,475,129,332 56,526,543 7,531,655,875a

The original data showed a grand total of 7,571,655,876 but has been corrected for mathematical errors and rearranged.

Source: HCLC, Japanese Zaibatsu and their D issolution, p. 289

as reproduced in Hadle.y„~ Antl trust . P.TB6.

81

By November 1949, of the total of 165,673,117 shares of stock received by the HCLC, 113,324,000 had been sold for

8,364,403,000 yen and when the disposal was complete in June

1951 j the net proceeds were 9,600,000,000 yen. Table 15 shows sales from June 1947 through October 1949 and Illustrates that

there were other government programs involved with the sale of stock other than Just the HCLC.

Under the capital levy tax of October 1946, payment of an extraordinary tax was permitted in kind. Accordingly, the Finance Ministry held stock which neex.ed to be disposed of to the publico There was also a disposal program because of stock held in

other corporations by "closed institution" . . . (which) were corporations that had been integrally involved in Japan's program of expansion ... or in controlling allocation and distribution in the wartime economy, such as the myriai control companies and . . . associations, Finally, there was a securities disposal program under the Anti- monop< 3 Law supervised bv 'ir^c, v the PTC (Fair • ' 1""' \,'ww iiiiii j. a S3 JL W iJ / «

Personnel Purge

The objective of the SCAP personnel purge was, as stated in JOS Directive 1380/15 of November 1, 1943, "to eliminate all persons who have been active exponents of

- militant nationalism and aggression." To this end, paragraph

23 of the Directive specified that "in the absence of evidence

• . . to the contrary, you will assume that any persons who have held key positions of high responsibility since 1937 in industry, finance, commerce or agriculture have been active

^Hadley, Ajrtitrust, p c 181. p Bib son, Zaibatsu on . p. 158.

82

TABLE 15

SECURITIES DISTRIBUTED BY THE SECURITIES COORDINATING AND LIQUIDATION COMMISSION June .1947 to November 1945

Qlass If led by Off eri^._Org}^i7aj^ion <

I No, of Shares Proceeds Distributing Agency (1,000) (1000 yen)

HCLC 113,324 8,364,403

CILC (Closed Institutions) 37,86" 2,121,744 Government (Finance Ministry) 27,44.1 1,740,447 Bank of Japan 195 80,644 Others 101 -— 5^93.0, .... Total 178,928 12,313,168

" . » No " Type of Sale

General (including local tender)

Underwriting Sales

Employee Sales

General (including local sales)

Consignment Sales

Off-Market Sales

To tal

Source: Had ley, Antltruqjt, p. 188

83 exponents of militant nationalism and aggression. "^ Thus, on

January 4 y 1946. SCAFIN 550 was promulgated which covered purges in the political, governmental and military sectors.

However, it was later modified to include the strict provisions of paragraph 23- In total, 1,966 persons, as shown in Table 16, were purged under the economic sections of this order.

To fill in gaps left by SCAPIfi 550 and to "eradicate

(the) personal tie- which has served influentially for the formation and maintenance of the zalbatsu enterprises, "^ on

January z -8 the Japanese government declared the "Law for 7, 19 }

Termination of Zaibatsu Family Control" (Law -Wo. 2). The law called for retirement of all zaibatsu family members who were

then "for ten years . . . (to) be excluded from positions of

officials in . . . (the particular combine) and . • . prohibited frcm conducting any activities which belong to the 3 competence authorized only for officials in such companies.'

The same conditions applied to top executives (i.e., directora, staff members with executive responsibility* auditors, and advisers with equal or greater authority or influence) who held positions prior to September 2, 19^5. There is a wide disparity between source data figures as to the number of

3- lbli ,

^Quotation from Article 1, Law for Termination of

| ba tsu Family Co n tr n 3 (Law No. 2, January 7, 19^8 FluT" sented in total in Bisson, b ssol 3 Ml ^§ii^£l JiJil£2i» PP« 293 301. 3 Ibid., Article 4.

84

TABLE 16

ECONOMIC FifRGE RESULTS VIWER SCAPIN 550

Barred Provisional^ SCAPPIN 550 or Designation^! Total oved . :

Government Financial Org. 26 207 233 Government Development Org, 1§4 201 Sub- Total 43 591 "43T Reinstated ~.1_ JL Sub -Total 42 389 431

Category G Semi-gov t and Others 200 200 Business Co m p a n i e s 422. Sub -Total ^39 914 Reinstated 18 Sub-Total fix 896 1_1525l-

•Total 681 1285 1966

Under the provisions of Uiia category, axx, specified key officers who resigned or were "out of office" at the time of the purge were designated as failing within the provisic of SCAPIN 550. If such an officer wished to appeal his case, he could do so within a 30 day period. If appeal was not made, he was purged by "provisional designation."

Sources ? Combined data from Bisson, Z albatsu Dissolution ,

p. 155 and.Hadley, Ant i trust"! pp. 92-93^

85 people actually purged under Law llo . 2. Because the writer is unable to reconcile these sources to come up with a valid composite figure, Table 17 presents both extremes.

TABLE 17

PURGE RESULTS UHDJ3R LAW NO. 2 OF 1948

First Source

Company officers affected 3489 Applications of exception 74.1 Disapproved _5£ Approved

Company officers purged

Note: This may not have taken into account those persons already purged under SOAPIIJ 550, resigned, retired or dead.

: .i ' Sourge : Bisson, Zaibatsu ' "23,» P» 175.

Second Source

Company officers affected Applications of exception Disapproved 3, Approved

Sub -Total Latent appointees, resigned or retired 1931 to 1945 Removed by SOAPIIJ 550 Deceased

Net additional officers purged

Of the 101 disapproved exceptions, only 40 were actually removed with the remaining 61 temporarily retained. Therefore, the net results of Law No. 2 were, in reality, the purging of 40 officers,,

Source: Hadley, Antitrust , p. 102

86

lor Legislation

Two pieces of major economic legislation came from the occ h had far-reaching effects on the Japanese economy. First, on April 14, 1947. an antimonopoly law, the

"I»a g to (the) Prohibition of Private Monopolies and the Maintenance of Fair Trade" (Law No. 54), was enacted.

Second, a de concentration law, called the "Law for the

JBli '.ion of .Excessive Concentration of Economic Power" (Law

No. 207) , was promulgated on December 18, 1947.

The.„.An timo.t •- Law

Law No. 54 was based upon a draft proposal submitted to the Japanese ;. rnment by the Anti-Trust Division of the U. S.

Justice Depar t and, when enacted, was "patterned after the

PederJ e Commission Act and the Clayton (Anti-Trust) Act. ,,J "

It consisted of ten chapters incorporating 114 articles. The

objectives of the act are found in Article 1 as follows J

This Law, by prohibiting private monopolization, unreasonable restraint of trade and unfair methods of competition, -hy preventing excessive concentra-

tion of -: • over enterprises, and by excluding undue restrictions of production, sale, price, technology, etc., through combinations and' agree- ats, etc., and all other unreasonable restraints of business activities, alms to promote free and fair competition, to stimulate the initiative of entrepreneurs, to encourage business activities of

enterpriser, j to heighten the levels of employment

and national income and, thereby, to pr< i the democratic and wholesome deve] int of national

economy ; i ell a^ to assure the interest of the (jreneral consumer. 2

1 Yamamura, Economic Policy., p, 10. c lbld .. Appendix IV, ramamura presents the first six chapters of Ui\? No. 54 both in its original wording and also in the wording changed by the 1953 amendment.

. "

87

Because of the law's relative importance, the substantive

portions of the legislation are summarized in Appendix II.

During the occupation period, there was one major

revision to the antimonopoly law. On .January 18, 1949, an amendment (Law No. 214) was enacted which: 1

1. Kcrrowed the n definition of the term 'competition' to mean either "supplying the same or similar goods or services to the same customers or- consumers" or "receiving supply of the same cr similar goods or services from the same supplier. 2. Deleted the prohibition from one company's owning in excess of 25 percent of mother company's debentures 3. Changed the .FTC review of security .trans- actions to one which was after the fact vice before it. 4. Relaxed the provisions regarding mergers and interlocking directorates. 5. Deleted the clause in Article 6 which had prohibited entering "an (international) agreement or contract relating to restriction on exchange of * *"* } ' I ... .- . / .. . .7., > ' * ' . £ q 1 3 H"fc3 C Q S c£* 4 aa] . « tion necessary for business activities."

DecpnceDtratlon Law

On December 18, 1947, a deconcentration law (Ho. 207) was executed. The rationale for the ls.w was stated in a SCAP news release published in the Hipp on ..Times the same day, which said I

Its broad intention is to establish a reasonable basis for competition and freedom of enterprise through the elimination of those concentrations of economic power which stifled efficiency as well as freedom. . . . It is essential to recognize that this De concentration Law is not Intended to hamper large-scale production or to prevent efficiently integrated

"Bisson, Zalbatsu Dissolution, pp. 188-190.

. .

80

enterprises. . . . Likewise it should be clear

that the - . . Law does not establish any maximum or minimum size for business enterprises and it is to be administered by weighing carefully the actual facts characterizing each company affected by the Law.-**

The essence of the law was contained in Articles 3 and

6. Article 3 defined

... an excessive concentration of economic power • . . as any private enterprise conducted for profit, or combination of such enterprises.

i hich by reason of its relative size in any lice or in the cumulative power of its position in many lines, restricts competition or impairs the opportunity for others to engage in business independently, in any important segment of business 2

Article 6 stipulated that the H0L0 wou.\d malie standards fox- determining what would constitute "excessive concentration" based upon consideration of certain defined criteria,

(Apt>en< III} •

Subsequently, the HGLC published two public notices, the first on February 8, 194-9 which specified its rules of procedure, and the second on the same day, which enumerated standards to be applied in determining excessive concentra- tions.

In July 1948, SOAP, through the HCLO, excluded the former zalbatsu banks from the provisions of Law 207, giving as a reason that the banks had been segregated from the holdl"

*4iadley, Antitrust, pp. 110-111.

^Quotation from Article 3* Law 207, as presented in its entirety in Appendix 5 of Bisson, Zaibatsu X/issolu : pp. 262-268

^Complete texts of HOLC Public Notices No. 1 and Ko. 2 a appear as : Ices 6 and 7,. respectively, in Bisson, Zaiba bsu D3 ution.

89 companies which were being reviewed under the anti-monopoly act,

They also announced that the provisions of the law *ould not be put into effect until after a board from the U. S. had reviewed the law in terms of the condition of the economy. The Review Board, chaired by Joseph V c Robinson, arrived in Japan on

May 4, 1943 and on September 11 issued four principles to be followed during the implementation of the deconcentratior, .law;

1. No order should be issued under the , , .

' law unless there is a showing of a prima fac case that the company restricts competition or impairs opportunity for others to engage in business. In the absence of such a showing, the company should be removed from designation. 2. Mere possession of nonrelated lines of business is not in itself sufficient in any case to establish that a company was an excessive concentration under Law Eo. 207. 3c Submission of a voluntary plan of reorganization is not in itself sufficient to

under Law No. 207. 4. The action a company is ordered to take by the HCLO under Law Wo. 207 should be directly related to the facts upon which that company was determined to be an ej^cessive concentration. ^

Table 18 shows the final results of deconcentratlon actions as taken by the HCLO under the provisions of Law No.

207. In 1950, and within the framework of certain prior enactments, the HOLC was divested of responsibility and its functions transferred to the FTC.

American Policy Reorientation

American policy had made some dramatic changes over the years of the occupation and spanned the gulf between concepts

1 Ibid .. p. 145

90

TABLE 18

DSGOKOEHTHATION ACTION UEDJBR LAW NO. 20?

Structural Changes

JiSiSfiSSZ. Change - - -— MM BMMMMJ MM Mitsui Mitsui Kining One coal mining and one metal mining company. OJi Paper Three pulp and paper mfg. companies. Oriental Can Two can manufacturing companies. Mi tsubishi Mitsubishi Heavy Ind, One machinery and two shipbldg. cos, Mi tsub ishi Mining One coal mining and one metal mining company. litomo Seika~"Mining One coal mining and one metal mining company. ', Imperial Textile One rayon and two flax companies. IatJl.PolicxJ-0 • pan Iron & Steel Two iron and steel companies. so, iken Industrial Two textile and one trading company. Japan Be Two breweries. Hokkaido Dairy Prod. Two milk products companies; disposal .of ...... two,,,, plants •

Lesser Changes

Mijsul Tokyo -Shibura Electric Disposal of plants. )'>:' "' ' Hitachi Works Disposal of plants. Nat'l Policy Co. Imperial Petroleum Disposal of stocks and unexploited mine lots. Japan Elee trie Generation and Transmission (with nine regional outlets) Divided intc nine private companies under a public commissio;

Japan Explosives Disposal of stocks. Shochiku Cinema iposal of securities. To ho Gin Disposal of securlt * m _ Actually divided in 1951 after the HCLC was divested oi responsibility and the functions turned over to the FTC.

Source: Bisson, Zalbatsu Dlssolul 149*

91

of r-; lament and the resumption of massive industrial recovery- efforts. The first indication of a shift in policy came in the controversy over the results of a report made by a State-War

Kiss ion on Japanese Combines led by Corwin D. Williams. The

Mis l, after a ten week investigation, made its report which was, in a large measure, incorporated into an American policy paper by the State-War-Navy Coordinating Committee (SWKCC).

The policy was subsequently forwarded to both SCAP as an interim directive, and, in October 1949? to the Far Eastern

Commission (JPiJO). In the latter organization, the policy became known as FEC-230. As part of its normal action, SCAP used the strong provisions contained in FJ3C-230 to create what

turned out to be the deconcentration law (NO. 207 s 1947).

However, after vigorous legislative debate, the U. 3., on

March 12, 1946, withdrew its support f::om FEO-230, thereby leaving SCAP in a politically embarrassing position which called for imrrediate modifications to the Japanese law.

A further example of the change in philosophy, and thereby policy, was exemplified by the Draper-Johnson Mission which investigated broad economic problems in Japan and Korea.

Reporting on April 26, 1948, the Committee (known as the

Johnson Committee) recommended that war reparations be reduced and that large dollar grants be made to -Japan so as to make

"available the initial imported materials required to augment ul production quickly. With regard to dissolution actions, the

Report to the Secretary of the Army, "Report on the Boom Position and Prospects of Japan and Korea and the Measu :equlred to : ove Them," (Johnson Committee" report). April 26, 1948, as extracted from Bisson, Zaibatsu Disi ion, p. 143*

2 92 report stated:

The period of uncertainty caused by this economic reform .should be made short and the area of uncertainty lessened as rapidly as possible. The possible disturbing effects should be allayed by care net to hurt production, and by limit:', reorganization to the minimum necessary to insure reasonable competi tion. This we understand is the intention of the occupation authorities and is further assured by their establishment of an American review board-1- to see that deconcentration plans do not adversely affect production and the broad program to achieve economic recovery. Care must also be taken that breaking up the z albats u monopolies does not lead to the growth of" governmental monopolies.

SCAP policy fc llowed this change by tapering off the pressure on the Japanese government with regard to economic reforms.

The Japanese, quick; to respond to the new freedom, did so by virtually emasculating the Anti-Monopoly Law (No. 54) by their

1949 amendment.

mi. - _•_„ * „ .Li ir _i_ 4 i <- ., 1 j ~ ««. j T ~ -^ jliiiz Cilauge j.ii uue u. u « pn j.xvoi.»jjiA uwwa.ru v apdij k<3.» ty manifested by cany things, and, not the smallest among them was the "cold war." By 1947, not only were differences between

the U, S. and the Soviet Union reaching gigantic proportions, but -'die U. S. -China policy of support for the Nationalists w in question,. Since the Kuomintang Army had suffered many defeats at the hands of the communists despite massive American aid, and the Nationalist government was riddled with open corruption, t partment began to realign its thoughts concerning Japan. The results were, that

lrrhe "American review board" turned out to be the one chaired by Joseph V. Robinson, as previously referred to in the text.

2 3isson, Zalbatsu Dissolution, p. 144.

1

93 year of the . . . by the end of the second occupation, (the Pentagon) began to propose that' Japan be promoted from "ex-enemy to partner. Ex-enemy and partner call for quite different policies. With a partner one is concerned only with its foreign policies. !5 and its With Japan as an ex-em the U. . allies were worried abou in1 1 political forces that had produced the foreign expansion.

The loss of China in 1949 to communist control, and the outbreak:

of the Korean War on June 25 , 1950, proved this change to be effective logic.

Another basis for the shift in policy toward Japan lay

in the area of the financial costs to the U. S e for the rehabilitation. For the period commencing in September 1945 and ending January 31* 1950, the government had given Japan aid 2 in food, fertilizer and industrial raw material as follows:

Sej fDcir. ' 6 $>194 000 1947 434,000 1948 451,000 1949 534,000 1950 351.000

Total $1,954,000

Whereas the U. S. military were in favsr of this aid as it helped build the Japanese economy, thereby resisting communism,

U. S. political pressure was against it in that, in accordance with the original occupation policy, Japan was to be responsible for its own economic revival,. If then, the aid programs were in political jeopardy, the only real alternative left from a

iHadley, Anti trust, p. 133.

'-'(•' . ] and footnote . 144. , p. 33 11, p

94- foreign policy aspect, was to permit and foster the continued existence of established and large Japanese industrial concerns

The last major area which forced the change in policy- was that of politics and was based upon the American concepts of fair play with its framework in the provisions of the U", S.

Constitution. The public debate which had preceded the U t S. withdrawal of support of its own policy, PEO-230, had been bitter and stressed the fact that the government was dis- regarding the sanctity of private property by arbitrary and quasi-legal means. This struck a responsive chord in the political sector and gave a mutual anti-authoritarian platform to both liberal and conservative politicians. Also involved closely in the political area and complimenting the FJ3C-230 controversy was the purge program. Whsreas it was relatively- easy to find a rationale for the purge of Japanese militarists and ultra-nationalists, it was not easy to apply the same rationale to top business executives. Therefore, the economic purge of personnel and the forced dives ture of stock, came

under a great deal of public criticism , The feeling that prevailed could be summarized by saying that

. . . this kind of disqualification (purge) by legislative or administrative measures would certainly be considered incompatible with basic democratic postulate of due process of law, and the legality of ordering individuals to divest themselves of certain types of property whose possession (was) otherwise legal, (was) open to grave doubts. 1

J-Hoshii, Business Coi bration . p. 6.

95

The effects of the deconcentra tlon program are still a

subject of much debate among students of the Japanese economy.

Although Table 19 summarizes the short-range effects, it neither

gives an indices as to the impact on the Japanese economy nor does it tell cf the longer range results. These results will

be taken up In Chapter V.

With the lessening of SOAP pre??sure and a new emphasis

on rehabilitation of industry, the years 1948-1952 produced a

vastly expanded Japanese economy. In 1.948, because most

industrial activities needed repair or modernization, and there were no reserve funds to pay for this, the Japanese government was authorized to use the proceeds fron the disposition of

items imported under the U. S. aid programs for that purpose.

By the end of the year, despite a growing inflation. waj? an upward turn in industry. To curb the inflation and thereby pave the way for Japan's reemergence as: a ma;] or world trading nation, the Dodge Plan1 was introduced by SCA? which, through the mechanisms of balancing the national budget, retirement of debt, discontinuance of government lending, reduction of subsidies and the establishment of a unitary rate of exchange at 360 yen to one U. S. dollar, proved effective. The slight recession which was created by the application of the deflationary measures was offset when the Korean War (June 1950} moved the economy into a period of boom.

mes after Joseph Dodge, economic advisor to SO

.

96

TABLE 19

SUMMARY OF DBOC TITRATION ACTIONS DURING THiS OCCUPATION IOD

Action

Outright Dissolution 16 Companies Dissolution with Reorganization 26 Con tnies Reorganization without Dissolution 11 Companies Untouched 30 Companies

Reorganization o -"cessive ^mcentratlons "

Companies Split 11 Companies with Plants or Shareholding in Other Companies Affed a

P e r s o nn e 1 .. Pr o gra m s

Economic Fargo 1966 Purged Law No . 2 40 F

S ouO.it, i/xa uKisai ' Pi Oj^ra-iu Antitrust: HCLC ¥8.3 billion (procei from sale) PTC ¥1.3 billion (paid-up value Other: Finance Ministry (capital levy tax) ¥1.7 billion (proceeds from sale) CILC ¥2.1 billion (proceeds from sale" Mis c ¥0,1 billion (proceeds from sale)

Note? Data have been modified to agree with previously presented information. Source: Rearranged fron ley, Antitrust , p. 443.

"

97

The termination of the Korean War boom in the spring of

1951 did not contract the expansion of Japan's industrial production. Because the purchase of equipment, supplies and services, as well as money spent on amusements for the U. S.

T and U. J\ . troops was maintained at a high level, it provided

the income necessary to procure capital equipment. This, in

turn, closed "he wide gap between Japan's technology and that of the West. The magnitude of industrial production changes from a period 1934-1952 is shown on Table 20.

The occupation ended April 28, 1952 under the terms of

the peace treaty signed in San Francisco on September 8, 1951.

From the point of view of American democratization efforts, it could be said of the occupation— Mitsureba -*• , |- kakuru no .. nvo nari— | — i iiiim H t —nrrnw m minim !!—wiwMh »i i iibhhjj il—hi. u hi iuj

-»

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^Jerome B. Cohen, an's Postwar Booi (Bloomingtons Indiana University Press, •), p. I9T.

98

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CHAPTER V

THE CHANGING PAGE OP JAPAN (1952-1969)

Introduction

In preceding chapters the structure of the zalbat.su has been presented as well as its origin and development througj

World War II. During the initial years of the occupation following the war, a major effort was made to democratize the economic sector in Japan by destroying the zalbatsu power structure-- the major holding companies, the stock ownership base, and selected top personnel. In addition, strong de concentration and antimonopoly legislation nas enacted with the dual objectives of applying maximum pressure during the occupation period itself and preventing a reoccurrence of i zaibatsu in the future.

In this chapter, after establishing a perspective wi regard to growth of the economy since 1952, an examination of the attitudes of the Japanese people with regard to businei the current laws, management personnel, political -economic structure and business groupings will be made* Such an effort will involve an analysis of not only the longer range effects of the occupation's democratization actions, but will also lead to a conclusion, as presented in the subsequent chapter, w: regard to the very existence of the zalbatsu within the frame work -of current big bus" in Japan.

99

100

Economic Perspective

In order to provide a background for understanding of

current Japanese business practices , selected economic statistical data are examined to describe the scope and volume of production* These data will provids an indices of growth and establish the performance of the Japanese economy. To this end:

1. Chart VIII provides an index of industrial production in terms of the type of industry and in comparison to the industry of other nations.

2. Table 21 indicates the value of exports and imports over a period of years.

3. Chart IX shows a representation of the real, gross national product (GNP deflated for price level changes) as the principal indicator of the overall growth of the economy.

There are three basic elements which various authorities agree serve, for the most part, to explain Japan's phenominal economic growth since the end of the occupation: the high response of the Japanese people to a market oriented, capitalistic economy; the active role of the government in the creation of an environment conducive to rapid economic growth; and the ability of the Japanese to assimilate and efficiently utilize massive amounts of Western technology and managerial

,>ertise.

Since World War II, the Japanese have thrived under the concepts of a capitalistic economic system of private enter- prise operating in free ra bs. Both the 'pre-war and post-war

10.1

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Index Numbers of Industrial ooo

Production in Japan (1960=100)

. 150

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1945 1950 05 1965

Source: Ministry of Foreign Affairs, Statistical Survey of Economy

of Japan 1 18. r p.

1 t 1 « 102

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CHART (X

Growth of Real GNP 1958 "67 (index numbers based on 1958)

00

50 Japan

00

50

00

I

I

1959 60 6\ 62 63 64 65 66 67

Source: Mintsfry of Foreign Affairs, Sfafisfscal Survey of Economy of

' Jaj V. . V-'',: ;y ,

104 growth records indicate that the Japanese did not lack responsiveness to economic opportunities either internally or externally. In this respect, the businessmen could be characterized as oriented toward the pragmatic, but energetic and restless when it came to looking for new opportunities.

From 1he short review of political-economic history, it can be concluded that Japan has neither subscribed to nor adopted Adam Smith's precepts of the "Invisible Hand" whereby any interfere! ce with free competition by the government was deemed to be injurious. From the Tokugawa Era, in which a central authority was first formed, the; government has always supported and promoted economic development with the ultimate purpose of building a strong nation. Because of this basic motivation, the analogy can be drawn that whereas the phrasa.

"h'hat's good for General Motors is good for the country," is rejected in the U. 3.; "What's good for Mitsui (or Mitsubishi, or Sumitomo or any of the largest companies) is good for

Japan, " and vice versa, is not only acceptable, but accurate.

Thus, business participates in the bureaucracy and the bureaucracy participates in business to weld an amalgam that is stronger than the individual components which go to make it up.

Japan has always been, and today still is, a group-oriented society. The Western concept of "rugged individualism" is

regarded with a certain ambivalency ; therefore, Anglo-American economic ideology, promoted during the occupation, has never really been fully adopted.

105

The third factor attributing to Japan's sustained economic performance has been the ability of the Japanese to obtain, assimilate and efficiently/effectively utilize Western technology and managerial experience. Japan was, for many years, known and criticized as cheap imitators of Western products. However, it was overlooked that the vast majority of the Western industrialized nations, including the United

States, began in a similar manner and that such efforts were greatly facilitated by certain common cross cultural ties—an advantage Japan has never enjoyed with the West.

The success of imitative reproduction, however, is only one facet of the economic development. To reinforce this aspect, the Japanese have added an ability to adapt and improve

Western technology to produce products efficiently and inexpensively. In the pursuit of knowledge, the country has been sending young nationals abroad both to study in universities and to work in overseas businesses. Meanwhile they have been building their internal technical education system to a high level. In addition, Japanese businesses havo procured massive quantities of patents, licensing arrangements, and foreign technical agreements since the end of the occupa- tion thereby narrowing the technological gap which existed for many years.

The post occupation effectiveness of these and many other factors can be measured in many ways. The foregoing statistical data has presented it in the context of Industrial

growth j external trade and real GKP. In terms of Japanese

2

106 labor itself, Table 22 indicates that real cash earning rates

(nominal rates adjusted by inflationary percentages) are on the increase and, although the propensity to consume has increased, so have savings which serves to help stabilize the economy.

The Politica l-Economic Structur e and Legislation

On September 1, 1953, the Diet passed an amendment to the antimonopoly law which reversed both the spirit and the letter of occupation policy. The most significant changes were

as follows :

1 . Admission of Recession and _Ratlonalization Cartels.*" Cartels and other collusive activities became legal in those cases where the competent ministry deemed it necessary on the grounds of averting a recession or for the purpose of rationalization. O D.vlr-.ro J.<*». ~ £• O J 1-1- - T -T A n "I .. J J According to amended article through 16, interlocking directorship, mergers and mutual stockholdings became legal, except when they conflicted with Article 9 (prohibition of holding companies.) or Article 2 (limitation of stockholding by a financial institution) and when the result

. . . did not limit competition In a market substantially. 3. Redefinition of Unfair Competition. Unfair competition and the catch-all clause of the original Articles 2-7, which read in part lessening of "competition which is contrary to the public interests," were amended to apply only in six specified cases of "unfair business practices."

4 • Total glim i na tio n of Two Ac tic Article 5 ""(prohibiting the establishment of or becoming a party to a monopolistic organization) and Article 8 "(prevention of substantial disparities in bargaining power) were deleted in to to from the act.

^lamaroura, Economic Policy, pp. 56-57,

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108

The single most important alteration was the first.

Recession cartels were permitted if the supply and demand were

out of equilibrium, prices fell to below production costs due

to oversupply, etc. The rationalization cartel can be defined

in terms of the Japanese word gorll which literally means

"to make it logical, " but which in economic terras means

. . . to adopt a larger unit of production which increases efficiency (a lower unit cost) when produced near or at the optimum level of produc- tion. The common phrase, "catch up with Western standard of efficiency," is a nontehnical

way of sayi: the same. (Therefore) . . . the term . . . (can) also be used to mean to make any aspect of the operation to yield more than a competitive profit by such means as acquisition^ a 2 of large market share by whatever means « . . .

Thus, rationalization agreements could cover such things as the

standardization of specifications and measurements, obsolete

process restrictions, concentration of production of certain

items, joint use of storage and transportation facilities, and

joint purchase of raw materials.

Through the application of the revised law as well as

the passage of other legislation, the government as well as

private industry has moved inexorably toward increased

concentration patterns. Tables 23 and 24 show the growth of

cartels by total number and by type of legislation,

respectively. In addition, Table 25 indicates the number of mergers approved by the Fair Trade Commission under the

*JMi., P. 48.

; \'bid.

109

TABLE 23

"

. NUMBER OP CARTELS (in force at the date indicated)

Date Number

March 31, I960 595 March 31, 1961 714 March 31, 1962 868 March 31, 1963 943 March 31, 1964 966 March 31, 1965 993 March 31, 1966 1,079 March 31, 1967 1,037 00 ( December 31, 1967 ,

Source: Hosh..i, Business Concentration , p. 70

TAB LB 24

NUMBER OF CARTELS BY LEGAL BASIS

~L&pi »££ I » f.rrt sla tiOT3 '- "" w » 8 ^ ,'„„ Antimonopoly Law Recession Cartels 16 1 Rationalizalion Cartels 14 13 13 Special Legislation Export- Import Transaction Lav 214 209 Export Fishery Industry Law 11 8 8 Fishery Production Co-op Law 6 6 7 Law Concerning Temporary Measures for Price Stabi- lization of Fertilizer Law Concerning the Organiza- tion of Associations of Small Enterprises 652 634 590 Costal Shipping Co-op Law 16 18 22 Law Concerning Rationaliza- tion of Environmental Sanitation and Related Bnt. 123 123 123 Law Concerning the Extension of the Liquor Tax, Etc. 12 12 12 Law Concerning Temporary Measures for the Promotion of the Machinery Industry h To ta 1 i« 07? i t o?7 1.001, Source? Hoshii, Bu s. i ne s s Co no n tra 1 1 n . pp. 70-71,

110

TABLE 25

NUMBSR 0? MERGERS, 1956-65

Fiscal fear Number b er 1956 381 1961 591 1957 393 1962 1958 715 381 1963 997 1959 413 1964 I960 864 440 1965 894 Total 2,013 To tal 4.061

M ergers by S ize of Cap . ta 1

Size of Capital After Merger Fiscal 56-60 Fiscal 6jL-6£_ ' Numb TuSb er ~"P j

Less than ¥10C million 1,823 90.6 3,426 84.4 ¥100 million-¥l billion 499 12.3 ¥1-5 billion 89 2.2 ¥5-10 billion 18 0.4 Over ¥10 billion 29 0.7

Source; Hoshii, Business Co ncentrati on, p. 38. liberalized laws. A major result of this movement was succinctly stated in that

. . . the . . .-wave of mergers has created richer and more powerful industrial groups. These are beginning to free themselves from their traditional dependence on banks that today are incapable of the ever growing requests for financing. 1

To sum up the political-economic relationships, it can be said that

in . „ . addition to such "macro" responsibilities as the governments of all free-enterprise economic, have come to assume — growth, full

^Xasuo Takeyama, "Big Industry Loosening lie J Ties," Suecesso (International Edition), August',' 1969, p

'

Ill

employment, stable prices, and a viable balance-

of-pa., bs position--. . . the Japanese govern- ment -:tly supports particular Industries, enters into the terms of technological agreements, advises on desirable prices, promotes changes in firm size and encourages car telization. i. Japanese businessmen regard this as an infringe"' ruent of their rights.^

Manageme nt Personn 3

The purge laws of the occupation as they affected zaibatsu families and their appointees, were only in effect

just short of four years. In 1951, ths Supreme Commander for

the Allied Powers authorized the Japanese government to

"review existing ordinances issued in Implementation of (SOAP)

directives . « ., for the purpose of e reiving through established procedures such modifications as past experience ,2 and the present situation renders necessary and desirable*

By May of that year, no economic purge^s were still under designation, a.nd in July, the day the Holding Company

Liquidation Commission was dissolved, the designation of zaibatsu family members was cancelled.

As to the family members, there is some difference of opinion concerning the effect of the purge. It is, however, most generally argued by business authorities that these 56 persons never regained the economic power that they either held

individually or as family groups. In short,

Hadley, Antitrust, p. 390.

^Blsson, Zaibatsu Dissolution, p. .179.

112

. • * the lives of the former zalbatsu families

changed . • . as Japan itself had changed. These individuals did not usually possess managerial skills or business acumen and were merely the titular heads of their empires. They were powerful only in the long tradition of their "houses" which controlled immei.'

fortunes. Consequently . . . (they) were totally urprepared to carve their niche in a new way of life. A few of them retired into a secluded life of their chosen academic pursuit,

while most . . . became. inactive rentiers.

Observing in 1953 , a Japanese writer commented, "they (the zalbatsu families) had to liquidate their real" estate and even their art collections to survive in the (postwar) inflation. Several years ago, they becai Shayozoku (the tribe of the setting; sun)." 1

The personnel who were promo tec. to fill the vacancies

created by the purges were, in the main, from the upper-middle

layer of management (e.g., sectional vice-presidents, plant managers, divisional supervisors, etc.) and were hand picked,

because of their administrative skills and managerial competence.

Despite the depurge of 1951, relatively only a few of

the prewar executives returned to resua.e active business lives at their old positions. There were several primary reasons for this, as expressed below:

First, after the war many corporations became independent and their top management consisted now of new and younger executives- there was little room left for the return of former corporate leaders (although the majority

. . . did not express a desire to come back);

^-Yaraamura, Economic Policy , pp. 11-12. For a discourse which is diametrically opposed to this viewpoint, see Cole, £aMnj^_Societx, pp. 8 3 -84.

2

113

second, a series of sweeping changes in the corporate environment after the war made the itnow-how of former executives critically obsolete (e.g., : were totally inexperienced in dealing with labor unions). 1

Of the ones who did return, took up their former positions

while others became consultants, ex officio chairmen, etc.

However, their total numbers were not large enough to reshape

the newer management trend. As an indices of the change in

managerial philosophy, a study of corporations found that

. . . with respect to 40 holding companies which escaped forced dissolution . . . , 9 companie had the nts (or chairmen of the board) in early 1952 as they had had at the time of

surrender . . . , and the remaining 31 . . . appointed new presidents (or chairmen of -the board) during the same period.

in addition, it was found that "the age; of chief officers was

lower. ' "in the 1951-52 period, the president or chairman of

the board was of an average ago of 51. £ years; at war's end, 60.2 years, "

Other than the personnel movements occasioned by the purges, there were several management changes. By dissolution of the holding companies and/or liquidation of the stock of holding companies which were not dissolved, the corporate power structure was essentially decentralized. Regardless of whether an individual held stock or not (stock ownership had been a

Komiya, Postwar 3 silo Growth , pp. 234-235. 2 f Ibid . . p. 23 3c

^Hadley, Antitr ust, p. 104.

114 prerequisite in prewar days), he could now become a member of management at various administrative levels. In addition, a

1950 major revision to the commercial laws contained provisions which served to promote the profess ions.lism of corporate managers, while at the same time decreased the power of the stockholders. This served to substantially increase the decision makirg framework within which the managers could operate.

General Patterns o f Sto ck Ownership

Since the war, changes have occurred in the distribu- tion of corporate stacks in Japan. Table 26 shows the 1945-

1960 pattern of the share distribution of companies capitalized for ?50 million and above. In general, it can be surmised that while the loiij; range effect of U19 occupation resulted in a. decline in the role of government (with regard to stock), it unintentionally produced a great increase in the role of financial institutions, and left individual holdings at much

the same percentage level as they had teen." 1 However, the number of individuals owning more than 100 shares of stock over selected years has been dramatically increasing on a continuum since 1946. (Table 27)

T ie Tren d Toward IncreasiKp- Oligopoly

Mergers and collaboration agreements have affected competition, supply and distribution as well as finance. Prom

1 Ibld .. p. 193.

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TABLE 27

NUMBER OF INDIVIDUALS OWNING MORE THAN 100 SHARES

Year 1946 1950 1956 I960 Number of Individuals 1,712,650 4>288,: 8,606,889 10,660,260

Table 28 it appears that over the last ten years, the trend

toward oligorolization has Increased, and because of the increasing liberalized policies, it w3.ll most likely become more intensified.

The prewar friendly oligopoly situation previously described still exists although companies of the major groups still compete in the same markets. Indicative of this pnliosopiiy was wits nop @n

Yawata Steel and Fuji Steel in 1961, as shown in Table 29.

Finance

With the rapid expansion of the economy, large companies! in the manufacturing and trading sectors have had to become more heavily iependent on banks as their primary source of finances. This choice of alternatives for capital financing was brought about by Japanese tax laws which allow corporations,

to deduct interest on bank borrowed capital as an expense whereas the money paid as stock dividends is taxable although, in fact, it is also an expense to the corporation. The natural inclination is to borrow from the banks rather than increase the equity capital which has, in turn, increased the

i - 117

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120 economic influence of the commercial banks. However, on the other hand, this increase in bank power is being offset because the amount of funds required has risen so sharply that

the top banks cannot afford the whole i at. This situation has made it possible for big industrial companies to exert manipulative power by the use of "divide and conquer" tactics.

The movement of firms from and to financial groups in 1967* is indicative of the general situation (Table 30).

Prewa c_^alb3^tsu„. .Qr o_up_s of Selec ted i r The Sti ucjture_ m

Ow; alp

The pattern of ownership since the occupation has changed radically. From the conditions enumerated in Chapter II, the Mitsui Mitsubishi and Sumltorso groups, except i7i minor eases. are without z albatsu family holdings aid honsha. The only ownership feature which is left is the horizontal cross-ties between companies within each group. Table 31 annotates this data and shows the percentage of stock owned by the top ten shareholders and, within that figure, the percentage controlled by the group itself. In addition, the table also indicates the cross ownership relation between the leading group banks and companies within the group.

A study of the table shows that the ownership pattern for each group has become diffused to the degree that complete

coordination is required if it is desired that a company be

identified as having tsui, Mitsubishi or Sumitomo ownership,

TABLE 30

NUMBER OF FIRMS JOINING OR LEAVING FINANCIAL GROUPS (1967)

. of Firms No. of Firms Joinin Leaving the

,~.-~Jz££l '~P_ Group

Industrial Bank of Japan 38 17 Long-Term Crec.it Ban],: of Japan y> 21 Hypothec Bank 17 31 Fuji Affiliates 3' 7 (6) 22 Mi tsublshi Affiliates 4:> 34 Sanwa Affiliates 2<) (8) 34 Sum i tomo Af f ilia r tes 3 S (9) 34 Mitsui Affiliates 35 (12) 46 Tokai Bank :>) Dai-Ichi Bank 8) Nippon Kangyo Bank 14) Daiwa Banlc I'd) Kyowa Bank V) 68 Bank of Kobe d)f Bank of Tokyo d) Hokkaido Takushoku Banlc 1) Cent. Bank for Agriculture & TO ~ x \jx ww t.i.",y 1 k 16 Cent, Bank for Commerce & Industry 12 5 Local Banks 23 50 Chuo Trust & Banking 6) Nippon Trust & Banking 5) 3 Mutual Banks 12 20

Life j Insurance 3 etc. 21 23 Total 415

Note: Figures in parentheses denote changes within groups.

Source: "Banlc Affiliations Under Reorganization," The Oriental Economist. October, 1968, p. 16.

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125

There is a marked difference between this and oynditiono which existed in 1946 as shown by Table 2.

In addition to a fragmented ownership base, the main banks of the -orewar zaibatsu have lost much of their individual. and combined power as is shown in Table 32.

'' d h ns and Interlocking P. borates iiiii Intra-Groi " i ii " i niT . liiiiFrm ii ih .in m i iiii i «m n iTj i ii«i»rJr»iii^Mi .iW ig Til . i T m ifrnYi g m wmO— i«««n» With the dissolution of the holding companies,

"presidents' clubs" were forced which held regularly scheduled meetings of the top executives of selected affiliated firms

and which , by some, are considered as "equivalent to the top

til level meetings of the former zaibatsu combines.

* • • In the Mitsubishi grouping the presidents

-, 'i • ;.-> r>-p or . the Friday Qlub

(K.V- L j ; in the Sumitomo grouj>ing the heads of 17 companies are in the White Waters Club

( Hakusu.1 Kai ) . e Mitsui grouping has two such Kai), clubs , fchs~27 member Monday Club (Getsuyo and -the more exclusive 17 member Second Thursday Club (MmgOmJSai). 2

Except for relatively few changes, the companies belonging to

each club are the same companies which were defined as core

companies by SCAP. (They were called "first and second line"

c ompa ni e s d ur ing tha t period).

Several factors which must be considered before

determining the relative position of the presidents' clubs in

terms of their becoming successor groups to the boards of the

^Yamamura, Economic Policy , p* 1°

2Hadley, Antitrust, pp. 206-207

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127 prewar hong ha are as follows: First, they are composed of people who are equals (e.g., company presidents) which is no small matter to a nation which has only recently escaped from a rigid social hierarchy. Second. th=y tend to be too big and are far from being completely cohesive. Last, there is no structure to compel one of the core companies to adapt a specific plan or program even when th^re is a consensus of opinion on the part of the group. Th 3 Oriental Economis t summed this up when it investigated tie functions of

Mitsubishi's Friday Club J

The Klnyo I serves as a clearing house for information, also as a consultative organ. It makes no decisions, and it has no secretarial machinery. Consequently, it would be erroneous to believe that the Klny o Kai exercises the authority and power formerly wielied by the n/r . j...... i. j. I tt „ .. - 1 \ -,-,•.- » «Il)OU.UiSli,X • . . ' ,' , . . . .DUO TJ.- •. 8 J.S

no denying that . V , (it) does function as an effective pivot for coordination of group affiliated activities. 1

Comprehensive and extensive Interlocking directorates, as illustrated in Table 3, were formerly used to control combine members. Today, if 1959 Information is correct, interlocks are relatively sparse (Table 33). In addition. since appointment and selection of top corporate leaders is no

longer made from, a central point (i.e. , the honsha), the inter lockatory features no longer have the strength to dominate as they had in the past.

!lamamura, Econom ic Policy , pp. 122-123.

, 123

TABLE 33 INTERLOCKING DIRECTORATES AMONG THE CORE COMPANIES OF THE MITSUBISHI, MITSUI, AND SUMITOMO GROUPINGS (1959 DATA)

Part A; Mitsubishi

Mitsubishi Bank Trading's president, director: kyo .?ire, Marine Insurance s ob n, director; Meiji Life Insurance's president, director.

Tokyo Marine, Fire Insurance Meijl Life Insurance's president, auditor.

M. Heavy Ind. Reorg. Trading's vice-president, director.

M. Japan Heavy Industries Trading's president, director; Steel Mfg.'s chairman, director.

He Steel Japan Heavy Industries 1 president, director; Electric 's vice-president, director.

: u C5 4 t Tl/T-£> . Trading a mana gi ng dir e c tor director.

M. Chemical Machinery Trading's vice-president, director; Heavy Ind. Reorg.'s managing director, director.

M. Rayon Trading's president, director; Real Estate's chairman, director.

M. Petrochemicals Trading's president, auditor; Bank's president, auditor; Metal Mining's president, director; Real Estate's chairman, director; Rayon $ s president director.

M. Cement Trading's president, director; Real Estate's president, director; Mining's president, director; Mining's managing director,

director; Asahi Glass's president f director. M. Warehouse Trading's president, director.

.

129

TABLE 33 Continued

r.'.m^nrjw .*-

Part B; Mitsui Showa Aircraft an Steel's president, director; Mitsui Shipbldg.'s president, director; Mitsui Shipbldg. g s director, director.

Tokyo Pood Products Taisho Marine, Fire Insurance's auditor, auditor.

Mitsui Real Estate Mitsui Bank's director, chairman.,

Part 0: Sumi tomo

Sumitomo Electric Ind.. Nippon Electric 's president, director; Warehouse's auditor, auditor

Japan Electric S urn i tomo Ele c tr ic ' s cha irma n, director.

Sumitomo Machinery Sumitomo Trading's vice-president, director.

S. Real Estate Sumitomo Chemical's president, director; Sumitomo Metal Ind.'s president, director; Sumitomo Bank's president, director; Sumlt.on;o Trading s president, auditor.

Source: Hadley, Antitrust, pp. 251-25-2.

: M -

130

Inter-Group R elationsr

i ii ri iMifi flu ii i i mum ihp »"irfiiiim m inrirnrnni— — —w~T*~ Although each group faces the same rivals in multiple sectors of the market as in prewar days, the frequency with which transactions of buying, selling and borrowing have crossed the lines of the grouping has increased. For instance

Mlt si: shi Heavy Industri es R< ;organlzed- among the principal firms from which it buys, Sumitomo Metal Industries? among the principal firms to which it sells, Osaka Sho sen-Mi tsui Shipping,

Mi tst.l. Chemical Indus tries —aiiong principal firms frcm which it buys, Mitsubishi Trading; among principal firms to which it sellse> Sumitomo Metal Industries.

Sumitomo Metal Indus tries --among principal firms frcm which it buys, Mitsubishi Trading and Mitsui & Co.; among principal firms to which it sells, Mitsui & Co.* korobi ya^okl (seven times down, eight times up)," 2

lHadley, Antitrust, pp. 255-256.

2 Cohen> Postwar Economy , p. 11.

CHAPTER VI

CONCLUSION

In the foregoing pages of the last chapter, both the modern economy and the major elements which serve to make up

the internal business elements of that economy were examined.

In addition, the workings of the Mitsui, Mitsubishi and

Sumitomo groi pings were considered in relation to these elements and to prewar criteria. From this a conclusion can be drawn as to the long range effects of occupation reforms and to the existence of the zalbatsu in the Japanese business world of today.

With respect to the lasting effects of the reforms, the answer is obviously a dual one —yes and no. Today, there

^s no zalbatsa family member prominent in investment or executive circles. In looking at today's business groupings among representatives of the major zalbatsu. it has become clear that th3 organizational structure is different although some of the same control techniques used in the prewar era are still being used. Even though the naraes remain the same, the groupings are loose confederations as opposed to the tightly knit monolithic units of old. From a situation where core companies acted only as if they were departments in a highly

131

132

centralized organization, the reforms have brought these same

corporations into the position of becoming separate viable

units. Company boards are now able to make fundamental

decisions with respect to such things as open discussions,

executive appointments, personnel policies and political

contributions which is markedly different from the combine

period in which, monolithic unity was a product of enforced and reenforced control via the honsha. Today, those ties of yesterday are shadows of the past and concerted action rests on a base of cooperation stemming out of common elements such as

trade names and trademarks as well as the long tradition of

collectivism which has characterized Japanese businesses for many centuries. Since the current top officers of these

companies had years of experience under the management and control system where complete emphasis was placed on the

organization as a whole, it is not difficult to see that a

sort of fiakubatsu (school clique) attitude still remains which

is strong enough to form a cohesive factor among equals within

the group.

On the other hand, the reform was not really effective

in breaking market concentrations and preventing cartels which was the real purpose of the antlmonopoly legislation. The weak political base of the Fair Trade Commission has enabled

other elements of the government to promote market concentra-

tion and cartelization. The government itself, through loan

and tax advantages, has encouraged large scale mergers. This

.

133 manifestation of Japanese business philosophy clearly illustrates the fundamental difference in attitudes toward competition between America and Japan. American competitive policy reflects a position that extreme market concentration either from self growth or merger is lot healthy, and encourages open and competitive markets. In Japan, however, competition is considered e^ual to "excessive competition" and, as such, is considered to be inefficient because firms are so small that they cannot stand u> to cyclical changes or compete in international trade. With the axis of the Japanese economy considered to be exports, a low-wage, high profit policy where the government is active in business, is of little concern to the citizenry. Although there are valid counter arguments to this system, the Japanese government and private business assessments remain the same and are unlikely

to change in the face of the highest sustained economic growth rate in its history or of any other.

With the change in corporate structure, a new group of words has arisen to describe the collective businesses.

The current general term for business

groupings in Japanese is keiretsu . which, broken1 into its component parts, is "keT ; meaning lineage, faction, group" and "rets u" meaning "arranged in order." Used without~"modifying adjectives, •*• the term usually refers to the successor groupings of zaibatsu companies, or other "headless" combines. ... In other words, keiretsu refers to a conglomerate grouping of ^majors""" with ties to one another of ownership, credit, management and marketing. The base is then one of multiple ties, in contrast to other

^Modifying adjectives are such things as k inyu k e Ir e ts u groupings which rest on credit sources; kigyo keiretsu* groupings which rest on raw material suppliers and/or product

. -

134

types of groupings which rest primarily on one type of linkage. 3-

Another postwar term, zajJj^aJL, has come into favor. It is defined as "the economic world or economic (financial) c" 2 circles ."n use,

... it practically supersedes zalbatsu . . . . By inference as well as usage, the new

term connotes big-business power ,$roup. „ . . More inclusive than zaibatsu. it is never- the less restricted to big business. In journalistic usage, i ; more often than not refers to the leaders of big business, particularly those who have the support .)f the powerful economic organizations. Zaikai also denotes the place where the craving for political power is openly expressed and gratified-- that hypothetical arena in which big business influences the government ... by the collective strength and unified will" of its economic organizations.^

This, the conclusion can be drawn that although the

companies for the most part still exist, the older ; Ibatsu per se no longer exists, but has been replaced by kelretsu in the busln3ss world and zaikai in the political-economic sphere. However, there is a dark side to the picture, as pointed out by Eleanor Hadley:

finishers; s hihon keiretsu . a subsidiary group which rests on capital and~where parent company ownership is high, manage- ment interlocks numerous and credit extension frequent; and kombinato« groupings which rest on technically related products where the output of company's plant is the raw material input for another and where transportation costs range from high to prohibitive.

^Hadley, Antitrust , p. 257.

2 t Kenkyusha s New Japanese-Bnglish Dictionary , p. 2044,

•^Yanaga Ohitoshi, Big; Business In Japanese Politics (Hew Haven: Yale University PressT" 1968), p. 32.

135

While government favors — credit, tax or otherwise—may greatly facilitate the performance of the economy, to which the postwar Japanese economy is clearly brilliant testimony, there is a price to be paid for this manner of operation. ... In Japan's past, the partiality of government favors was a major contributory factor

to the development of the zalbatsu. . . .

Political history, including Japanese history, provides many illustrations of the unfortunate political consequences of (economic) concentration. -*

This latter view is particularly appropriate at this

time. Emerging large organizations, such as the current Toyota

Group, show every single facet of the old zalbatsu in their

organizations with the one exception of the f inancial/banklng

ties. If these businesses develop in the same manner as in

the past, it is only a question of ti.ne before there will be

power.ful group bants emerging, and with the banks will come more market concentration.

The problem, the warning, and the potential outcome

are all succinctly and beautifully stated in the word picture

drawn by the seventeen-syllable Japanese poetry called haiku«-

When the tight string snapped, the kite fell

fluttering . . . then . . . It lost its spirit. 2

^adley, Antitrust, pp. 454-, 406-407. 2 Haiku , . Harvest trans, by Peter Beilenson and Harry Behn (Mount Vernon, N. I. : The Peter Pauper Press, 1962), p. 49.

APPENDIX I

GLOSSARY OF JAPANESE TERMS

Ban to A clerk, usually the chief clerk

Bakufu Bureaucracy of th-3 Tokugawa era Chonin Merchant class Chosen Korea

Daiiayo Local lords of the Tokugawa era Dokusen shihon Monopoly capital

Grakubatsu School clique

Getsuyo Xai Mitsui ! s Monday Club

n i J « vruiauo, CSU I Aj_j,j. I/CIA y ljAAi|«ti v/ !. uj.^-j.j. \j'-*j. J.a vo Hakusui Kai Sumitomo's White Waters Club

Hlraga.na Current Japanese syllabary Honsha Head holding company of a combine

Ho nz ens ha Head family holding company of a combine Kambatsu Official clique or bureaucracy

Kanji Japanese ideographic script

Katakana Current Japanese syllabary

Kazoku seido Family system or organization

Keiretsu Current term for business groupings

Kinyo Kai Mitsubishi's Friday Club Kodoha Army "Imperial Faction" of the 1930s

136

137

Kokuhonsha National Foundations Society-

Kokuryukal Society of the Black Dragon Junsen^i Keizal Quasi-war time economy

Minseito Political term referring to the "Democratic Associates Party"

Nimolcu 2 Mitsui's Second Ihursday Club

Nippon GInko Bank of Japan Nippon Yusen Kaisha (NYK.) Japanese Mail Steamship Company

Nomin Peasant class

Saki Rice wine

Sakurakai Society of the Charry Samurai Warrior

Seiyukai Political term referring to the "Association of Political Friends" Shinka zaibatsu New zaibatsu Shogun Warlord

Shogunate Rule by warlords Taisei Yokusan Kai Imperial Rule Assistance Association Tonya Wholesale establishment

Toseiha Army "Control Group" faction of the 1930s Zaibatsu Huge politically and economically powerful combines usually family dominated and tightly controlled through management and financial interlocks

Zaikai Economic or financial circles

" " "

APPENDIX II

THE SUBSTANTIVE PORTIONS OF THE ANTIMONOpOLI LAW

Chapter I, Article 2: Defined such terms as "entrepreneur," "competition," "private monopolization," etc. Also defined the perameters of the terra "unfair methods of competition" as : (1) undue price discrimination in the "supplying of commodities, funds and other economic benefits." (2) "supplying of commodities, funds and other economic bensf its at undue low prices . (3) stealing of a competitor's customers by unreasonably "inducing or coercing ... by means of offering benefits or that of threatening disadvantages." (4) "unwarranted refusal to receive from or supply to other entrepreneurs commodities, funds and other economic benefits. (5) maintaining exclusive or sole agency contracts. (6) forcing selection of officers in other companies

Chapter II: Dealt with private monopolies and "unreasonable restraints of trade." Article 4: prohibited participation in price fixing; restricting output, "technology, proc.ucts, markets, . . . customers, . . . construction or expansion of facilities."

Article 5 •' prohibited participation in associations which controlled the flow of products' or materials (internal cartels or monopolies). Article 6: prohibited participation in international cartels.

Chapter III: Dealt with "substantial disparities in bargaining power." Article 8: directed that the Pair Trade Commission (FTC) could, when founded, order the transfer of "a part of (the) business facilities" or "take z.ny other necessary measure" to eliminate "disparities in .bargaining power if it was not based upon "technological grounds."

Chapter IV: Detailed restrictions on such things as "stock holdings, multiple directorates, mergers and (the) transfer of whole business (es ).

138

139

Article 9: prohibited holding companies which were defined as "a company whose principal business is to control, by holding stocks, the business activities of another company Article 10: prohibited the acquisition or possession of stock in another company by nonfinancial firms which would restrict competition unless horizontal integration was justified on technological grounds. Article 10: prohibited the acquisition or possession of stock in another company by nonfinancial firms which would restrict competition unless hlrisontai integration was justified on technological grounds. Article 11: prohibited financial firms from owning more than 5 percent of the stock of any other single enterprise, cither industrial or financial, and also prohibited the purchase of stock in competing firms. Article 13: prohibited interlocking directorates in competing floras and provided certain other restrictions to noncompetlng firms under the same ownership.

Chapter V: ])ealt with "unfair methods of competition."

Chapter VI: Dealt with exemptions to the law.

Chapter VIII: Set up the Pair Trade Commission (FTO).

Chapter IX: Dealt with court appeals from FTC rulings.

Chapter X: Provided for penalties.

APPENDIX III

EACT0P3 WITHIN THE DECOJS ^ TRATION LAW TO BE USED

FOE DETERMINATION QE I ESIVE CONCENTRATIONS

1. Percentage of amount of production or other economic activity ... to the total production capacity or total amount of other economic activity.

2. Comparison of present production capacity in Japan proper with maximum capacity in Japan proper on or prior to Juno 30, 1937, of any enterprise.

3. Comparison of percentage 3f present production capacity or amount of other economic activity . . . of any enterprise to the total production capacity or total amount of other economic activity ... in tie respective field of activity.

4. Relationship of control over other enterprises.

5. "he number, location and sther geographic conditions of plants operated by any enterprise.

6. JThether plants are inter -re la ted in productive processes and extent of such interrelation in use of raw materials, products produced or in markets for products.

• 7. Control of raw materials by any enterprise.

8. History of expansion of business activity by means of mer^gar of Independent enterprise or other means,

9. Comparison of the efficiency of production of any enterprise with the efficiency of its separated parts or combination of separate parts.

10. Participation of any enterprise in or the existence of any arrangement . . . which provides for special privileges in the purchase or sale of materials, restrictions upon production or distribution, fixing prices, restrictions upon business or sales areas, or the exclusive exchange of patents or technical information.

11. Control over substantial business activity operated by Individuals or members of family.

140

: :

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Thesis 118121 S572 Smel low Zaibatsu: a study of Japanese combines yesterday and today. 2IJUL70 DISPLAY

Thesis 113121 S572 Sme 1 low Zaibatsu: a study of Japanese combines yesterday and today. : 00 ! DOS v